HgCapital, the London-headquartered private equity firm, has announced an offer to acquire the entire issued share capital of W.E.T. Automotive Systems AG for E169m. W.E.T.’s management has fully recommended the E52.70 per share offer to shareholders.
Including E6m of existing debt, the transaction has an enterprise value of E175m. Hg intends to invest E70m of equity. ING BHF-Bank has arranged a total of E120m in senior debt and mezzanine facilities to fund the acquisition and cover costs.
Under the deal, W.E.T.’s CEO Peter Moll and CFO Dieter Haap are to become shareholders in the business.
In line with new takeover regulation introduced in Germany 18 months ago, Hg must secure approval from 95 per cent of W.E.T.’s existing shareholders in order to be able to squeeze out the remaining five per cent and take full control of the business.
“In order to get to this level, you need to start with a stronger platform than in the UK, where 90 per cent shareholder backing is sufficient for a public-to-private. We’re confident we can get to 95 per cent”, said Trevor Baily, head of Hg’s Frankfurt office. Bodo Ruthenberg, chairman of W.E.T.’s supervisory board who founded the business in 1968 and owns 66 per cent of the shares, has signed an agreement to sell his stake to Hg.
The company, which claims a 58 per cent share of its market segment globally, listed on the Neuer Markt in 1998 where it ranked among the few stocks that continued to trade significantly above their issue price despite the problems at the stock exchange. According to Baily, Hg’s offer constitutes a 23 per cent premium over W.E.T.’s average share price of the last three months.
W.E.T. recently reported a 23 per cent increase in turnover to E131.5m for the nine month ended 31 March 2003. During the financial year ended 30 June 2002, the company generated E146.6m in turnover and E23.9m in EBIT. Third quarter trading results are due to be published on Friday.
For Hg, completion would mean a second successful transaction in Germany within six months. In December last year, the firm acquired FTE Automotive from Dana Corporation for E150m.
Martin Block, a director of HgCapital in Frankfurt, said in a statement: “Notwithstanding the recent spate of withdrawals from the German private equity market, our offer for W.E.T. reinforces our commitment to the German private equity market.” Private equity firms to recently have turned their backs on Germany include Alchemy Partners and Legal & General Ventures, which closed their Frankfurt offices. US manager Clayton Dubilier & Rice also terminated a German operation recently.
Working with management, Hg is planning to grow the business both organically and by acquisition. Under its new ownership, W.E.T. intends to take advantage of strong growth prospects for automotive seat-heating. The private equity firm has set aside funds to back strategic acquisitions going forward.