Private Equity News & Analysis

Hg sells off German transmission division for five times return(2)

Hg has realised a five times return on its investment in the Hirschmann Group, a signal transmission business, after selling one of its divisions to US rival Belden for €245 million.

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HgCapital has sold one division of German signal transmission business Hirschmann Group to Belden, a listed US rival, in a €245 million ($317 million) deal.

Hg is set to realise a return of over five times its original investment from the partial exit. It bought the Hirschmann Group in 2004 for €115 million, an investment that has proved to be one of its most successful German Mittlestand deals.

Since taking control of the business, Hg has sold off two under-performing non-core divisions, invested in new product development and reorganised the business into two separately-run divisions: Hirschmann Automation and Control, which sells networking components and electronic control systems, and Hirschmann Car Communication, which sells automotive components like car antennas and TV tuner systems.

The former is now one of the leading companies in the sector, recording sales of €190 million last year across Europe, North America and Asia. It operates in three main areas: industrial ethernet, which involves fibre optic and wireless networking devices; load moment indicators, used to stop cranes from tipping over; and electrical connectors, including intelligent switches that can be manipulated from outside a network.

Belden, which is listed on the New York Stock Exchange, is a larger US rival of the Automation and Control division with revenues of $1.35 billion (€1.04 billion) last year. Its strength is currently in the connectors area, but it is hoping to expand into new markets. It plans to retain Hirschmann’s current managing director Reinhard Sitzmann to run the business.

Hg may look to make a full exit from the Hirschmann Group before too long. The firm also said it is considering strategic options for the smaller Car Communication division, which had sales of about €100 million last year and employs around 600 people. This may lead to a sale or a refinancing.

Justin von Simson, who led the deal for Hg in Germany, said the Mittlestand market remained challenging but attractive. “There’s plenty of high quality businesses; the challenge is to unlock them,” he said.