DBAG follows capital raising with SAF deal

German private equity firm Deutsche Beteiligungs (DBAG) has announced its intention to acquire a majority stake in axle manufacturer Otto Sauer Achsenfabrik Keilberg (SAF).

SAF, a leading German axle manufacturer, has agreed a deal with DBAG that will see the German private equity firm take a controlling interest.

DBAG is investing in the firm through its Deutsche Beteiligungs Fund IV, which it closed on €228 million ($277 million) in September 2003 – short of its €250 million target.

Last week DBAG – which is listed on the Frankfurt Stock Exchange – took advantage of improving stock market sentiment to launch a share issue expected to raise more than €51 million. In a statement, DBAG said “the proceeds from the capital increase will serve to strengthen the equity base …to finance investment opportunities”.

In a further statement today, DBAG announced that exercise notices had been received for 43 percent of the capital increase. This comprised irrevocable commitments from Deutsche Bank, one of DBAG's three principal shareholders (accounting for around 36 percent of the capital increase) and two other unnamed shareholders (together accounting for around seven percent). Deutsche Bank will retain its 15 percent interest in DBAG following the issue.            

DBAG's other two principal shareholders – Gerling Lebensversicherung and Vermoegensverwaltung Wilhelm von Finck – have exercised subscription rights for 21.3 percent of the capital increase. In conjunction with the issue, they have announced their intention to reduce their stakes from 15 percent each to 11.3 percent and ten percent respectively. DBAG said this would improve the liquidity of its shares by increasing the free float portion.     

Financial details of the SAF deal have not been disclosed, but the firm generated sales of nearly €260 million in 2003. SAF is the number two firm in Europe in axles and suspension systems for heavy-duty tractor trailers and semi-trailers, with a 30 percent market share. It has doubled its sales since 1997 having introduced new products, expanded its sales network and focused on customer service.

In a statement, DBAG said the deal will “settle the succession issue in this company”. Current managing director and majority shareholder Ulrich Otto Sauer becomes a partner and member of the supervisory board, while Rudi Ludwig becomes chief executive officer.

“This transaction proves that, in addition to corporate spin-offs, there is a further very promising market with buyout potential in Germany – our long track record in Germany’s mid-sized industry constitutes a prime asset in that market,” said Torsten Grede, a member of the DBAG management board.

SAF, which employs 1,100 staff – including 880 at its German manufacturing plants in Bessenbach and Woerth am Main – will now focus on growing in Eastern Europe and Asia Pacific. The firm has an existing joint venture in China, and has slated the construction of a further manufacturing site there in order to become a major player in the Chinese market.        

DBAG, which has around €495 million under management, focuses on established mid-sized enterprises in German-speaking countries and has existing interests in 44 portfolio companies.