European buyout firm Candover has teamed up with Icelandic banks Eyrir Invest and Landisbanki to buy Dutch conglomerate Stork for approximately €1.5 billion ($2.2 billion).
Upon completion, Stork’s food systems division will be sold to Icelandic trade buyer Marel Food Systems for €415 million.
According to a source close to the deal Candover has acquired 75 percent of Stork while Landisbanki and Eyrir Invest have jointly acquired 25 percent.
The bidding for Stork has been protracted. Candover initially attempted to buy Stork for €1.5 billion, but Marel began building up a blocking stake with support from the Icelandic banks. This eventually led to Candover abandoning its initial bid two months ago. Eyrir Invest, Landisbanki and Marel had built up a circa 43 percent stake in Stork blocking the offer.
Hedge funds Centaurus and Paulson agreed at the time of the initial offer to irrevocably sell an approximate 33 percent stake in Stork to Candover.
The consortium has made a €48.4 per share offer for all remaining shares. The deal is priced at an approximate multiple of 10 times 2006 EBITDA of €162 million.
Marek Gumienny, Candover’s managing director, said: “We have done (the deal) in very difficult and challenging markets. Leveraged buyouts depend on leverage. When leverage isn’t around it is difficult to do a leveraged buyout.”
The deal is one of the first private equity buyouts greater than €1 billion to be funded since the liquidity problems in the global credit markets began.
The level of leverage had come down by 20 percent from the first offer to the second offer and the cost had gone up by 20 percent, Gumienny said. He declined to comment further about the capital structure of the bid. Financing was provided by Goldman Sachs.
Gumienny said Candover would initially use Stork's technical services division to pay off bank debt and once the aerospace division of Stork became cash generative it would also be used to pay off debt. Candover is already in talks to buy another aerospace company, he said.
Gumienny said Candover’s ownership could be longer term than the typical five year holding period of buyout firms. “Aerospace is not a short term business but something you invest in for decades,” Gumienny said.
Despite concern from the Dutch media that an important national business had been sold, Gumienny said: “Stork as a public company was owned by financial institutions around the world”. Its ownership by international private investors would be little different, he said.