Private Equity News & Analysis

Dutch merger revives BC’s Baxi

Having been at risk of breaching covenants and defaulting on interest payments, the future now looks more secure for BC Partners’ heating equipment manufacturer, as it becomes part of Europe’s third largest company in its sector.

-

Baxi, a manufacturer of heating equipment and boilers that recently came close to breaching its debt covenants, has agreed a merger with Dutch-headquartered company De Dietrich Remeha Group.  

The merger will see Baxi’s owners – private equity firms BC Partners and Electra Partners – inject around €100 million of fresh equity in the business and own significant minority in the resulting entity.  The combined

It was impossible to go out and refinance the debt.

Andrew Newington

business will be majority-owned by De Dietrich Remeha’s owner, The Remaha Foundation.

“Baxi was a leveraged entity and was coming to the time when it had to amortise its debt,” BC Partners’ managing partner Andrew Newington told PEO.

“Performance had been perfectly okay, so it was not a huge issue from a covenant perspective. But with the

Baxi: bigger is better

markets closed today it was impossible to go out to refinance the debt, so this transaction has the double benefit of providing both scale and a good solution to capital structure issues,” he added.

The merger will result in a combined business with revenues of €1.8 billion, EBITDA of more than €225 million and 6,400 employees, the firms said in a statement. It will be the third buggest boiler maker in Europe behind German firms Vaillant and Bosch.

“This is an affirmation of our original investment thesis when we bought Baxi, that this was an industry that needed consolidation and that those companies that were of the right scale would ultimately win the battle,” said Newington.

BC Partners bought Baxi from Electra and Candover in 2004 for €984 million, with Electra retaining a small minority stake. Six months after the acquisition BC partially exited the investment, selling shower business Aqualisa and returning around €115 million to investors in BC’s seventh and eight buyout funds.

In June Baxi warned that it was close to breaching its cash flow and leverage covenants and that it was at risk of defaulting on around £21 million (€24 million; $34 million) in interest payments due at the end of June. The company since agreed a covenant waiver with its lenders and has met the interest repayments.