Gores in 3x power exit

General Electric will buy Lineage Power, whose business lines include power conversion systems for cloud computing, in a deal valued at $520m.

Gores Group has agreed to sell Lineage Power to General Electric in a deal valued at $520 million. The private equity firm stands to see roughly a 3x return on investment based on the sale to GE. Gores acquired Lineage Power in January 2008 through its $1.3 billion Fund II.

“It has been a very successful investment for us,” Gores managing director Ryan Wald told PEO.  “The firm was part of our 2008 acquisition from Tyco (Electronics).”

The Lineage transaction is expected to be finalised in the first quarter of 2011, pending regulatory approval.  The $520 million transaction was worth roughly 8x the enterprise value of Lineage on a 2011 EBITDA basis, according to GE.

The acquisition is strategically significant to GE because Lineage serves as a bridgehead into the $20 billion-per-year power-conversion market. Lineage Power’s business line includes power conversion systems for cloud computing as well as mobile-internet infrastructure solutions. Lineage clients include wireless providers like Verizon and AT&T as well as equipment manufacturers like Alctael-Lucent, Cisco, Ericsson, Juniper Networks and Oracle.

The Plano, Texas-based firm has manufacturing operations in China, Mexico and India. The company reported revenues of $450 million in 2010. The firm’s CEO Craig Witsoe had spent 16 years at GE prior to joining Lineage.

The sale represents the firm’s second exit related to its 2008 purchase of Tyco Electronics Power Systems. Vincotech had previously fallen under the umbrella of Lineage Holdings, but the two divisions were split soon after the acquisition from Tyco.

In December, Gores completed the sale of Vincotech to Tokyo’s Mitsubishi Electric Corporation for an undisclosed sum.

Vincotech specialises in producing low-power modules for solar generation and industrial applications. Terms of that deal were not disclosed, but Gores will retain ownership off the firm’s Shenzhen, China-based manufacturing unit as a standalone portfolio company.