Dunedin Capital Partners, the Edinburgh-based private equity firm, has backed a £21m ($34m) management buyout of Hickson & Welsh, a chemical manufacturing unit of American giant Arch Chemicals Inc.
Hickson & Welch specialises in organic chemistry, producing sophisticated molecules for use in agro-chemicals, pharmaceuticals, pigments and detergents. The company, which employs 300 people in West Yorkshire, reported sales of £40m in 2002.
Arch Chemicals bought the former Hickson Organics Division as part of its acquisition of Hickson International in August of 2000. The organics division was viewed as non-strategic and Arch announced its intention to divest the division’s two businesses located in Virginia and Castleford. In March of 2002, Arch completed the sale of the Hickson DanChem Virginia operations to US private equity firm American Capital Strategies.
The buyout of the UK business is being led by John Markham as chief executive and Richard Whitwell as finance director. Bob Jordan has been appointed as non-executive chairman and Nicol Fraser of Dunedin is appointed as a non-executive director. Dunedin has provided £9m of equity for the transaction, with the remainder being provided through a debt package arranged by NMB Heller.
Dunedin’s investment is made via its Dunedin Enterprise Investment Trust and the Dunedin Buyout Fund, which held a final close last December on £54m. The fund, which held a first close on £45m in May 2001, had originally targeted a final total of £75m.
Dunedin’s most recent transaction was made alongside ABN Amro Capital when the two backed Gardner Aerospace, the UK-based aerospace components manufacturer, in a deal that secured the future of the Nuneaton-based company. The deal was also valued at £21m.
“We look to invest equity of between £3m and £15m per transaction so this is a target transaction for us,” said Nicol Fraser, investment director at Dunedin. “We were contacted by the company’s financial director at the beginning of the year and the deal is the culmination of six months’ work.”
Fraser said Dunedin was hoping to complete further deals before year-end and that heads of terms had already been signed on a further buyout. “There are opportunities for us at the moment,” he said, “although there is not a great volume, so it is important to identify the businesses with strong management teams.” The firm says it invests across all sectors in UK transactions valued at between £5m and £40m.
Deloitte & Touche and Cogency carried out financial and commercial due diligence. Wragge & Co acted as legal advisors to management. Gateley Waring acted as legal advisor to Dunedin.