Carlyle pursues engineering buy and build

The US private equity house has launched a £100m public to private offer for UK engineering business Firth Rixson as part of plans to merge the business with a US portfolio company.

Carlyle Group, the US private equity firm which yesterday took a minority stake in UK defence research organisation Qinetiq, has announced details of another UK deal, this time a public-to-private offer for specialist engineering business Firth Rixson.

Carlyle has offered just over 25 pence per share for Rixson, valuing the company at £105.7m inclusive of debt, which currently stands at £51m. The offer is at a 119 per cent premium to the share price on Thursday, the day prior to the announcement of the transaction.

In the year ended 30 September 2002, Firth Rixson reported consolidated turnover of £202.1m and pre-tax profit of £7m. Firth Rixson reported consolidated net assets of £92.4m.

Carlyle plans to merge the business with its US portfolio company Forged Metals Incorporated. FMI is based in California and specialises in the production of forgings primarily for aero-engines, airframe, missile and power generation applications.Loan facilities totalling £115m have been lead arranged by Bank of Scotland of which around £95m will be drawn down to fund the acquisition and refinance Firth’s existing debt. 

Carlyle is making the investment from two fundsCarlyle Europe Partners, the firm’s E1bn European buyout fund launched in 1997 which is now 73 per cent invested across 16 transactions and Carlyle Partners III, its third US buyout fund which has so far invested 28 per cent of the $3.9bn raised in December 2000.

Carlyle director Robert Easton said: “Firth Rixson has good niche positions in attractive markets, based on its unique technology and asset base. The group has excellent organic growth potential and good scope for operational improvement.  The merged entity will provide a platform with sufficient critical mass to build a leading, fully integrated supplier of specialist forgings.”

Firth Rixson was advised by Rothschild. Carlyle and Forgings were advised by Lehman Brothers.