Doughty Hanson has sold Spanish bus and bus operator Avanza Group to Grupo ADO of Mexico for an undisclosed sum, as it prepares to officially hit the road with its sixth buyout fund.
The firm sent out initial documentation to its existing investors earlier this month as part of its pre-marketing efforts, and is likely to formally come to market in Q4 with a target of €2 billion, according to a source familiar with the matter.
It will be the first vehicle raised by the firm since the unexpected death of Nigel Doughty in February 2012. Last summer, the firm restructured itself, paving the way for raising a new fund.
Doughty declined to comment on fundraising plans.
Since Doughty bought the business in 2007, Avanza has become the second-largest bus operator in Spain and successfully completed six add-on acquisitions, the firm said in a statement, as well as completing a bond issue of €490 million in May. However, the business has suffered from the cuts to public sector expenditure in Spain since the onset of the financial crisis.
“Since acquiring the business in 2007, Avanza has successfully navigated unprecedented, challenging economic conditions in Spain,” Francisco Churtichaga, a partner at Doughty, said in a statement. It is understood that this exit returned just over 1x.
Doughty retains a strong interest in Spain via Grupo Hospitalario Quiron, a Spanish private hospital group it acquired in April 2012. That investment – which, unlike Avanza, is not reliant on state spending – is performing well, according to a source.
Although many investors still perceive Spain as a challenging market, “domestic growth is achievable if you pick the appropriate local trend”, a source told PEI recently, citing ageing population and the outsourcing of public services as two big growth drivers.
With the realisation of Avanza, Doughty has now returned 65 percent of its Doughty Hanson & Co V, a €3 billion 2007 vintage. In June, Doughty sold cinema group Vue Entertainment to Canadian investors OMERS Private Equity and Alberta Investment Management Corporation (AIMCo) for £935 million, more than doubling its investment. In March Doughty listed HellermannTyton, which generated a 2.4x return.
Prior to Vue Entertainment, Doughty sold Norit, a producer of activated carbon which is used in the purification of water and air, in two parts: in May 2011, Norit’s Clean Process Technologies division was sold to a trader buyer for €503 million, and then a year later, Doughty sold Norit’s Activated Carbon division for $1.1 billion. The total return on the investment was 2.5x, representing a total distribution of €836.8 million and an IRR of 23 percent, according to Doughty’s annual review 2012.