HgCapital completes €225m recap

HgCapital, the European mid-market private equity firm, has returned €91m to its investors at 1.7 times cost from the re-capitalisation of portfolio company FTE Automotive.

FTE Automotive, a German manufacturer of components for car clutch and brake systems, has completed a €225 million ($275 million) re-capitalisation, which has allowed investor HgCapital to return €91 million in cash to its investors at 1.7 times cost.

Barclays Capital, which backed HgCapital’s management buyout of the business in December 2002, has also fully underwritten the debt facilities for the latest deal.

Re-capitalisations allow private equity investors to achieve a partial exit from an investment, while still retaining a significant stake to take advantage of what is perceived to be a continuing opportunity. Barclays agreed to the re-capitalisation on the basis of a strong performance at FTE, which is forecasting EBITDA of €58 million this year, compared with €33 million at the time of the buyout.

In a statement, HgCapital revealed that HgCapital Trust plc, an investment trust that invests in all HgCapital’s deals, will realise £11.5 million in cash from its original £6.8 million investment in the deal. It retains a residual investment worth £2.6 million based on a valuation applied in June 2004.

“Since the original acquisition one and a half years ago, HgCapital has re-crafted the strategy and hired a new management team, resulting in a profit improvement of nearly 80 percent,” said Trevor Bayley of HgCapital in Frankfurt. “We are pleased to have returned cash to our investors ahead of our original plans and look forward to working with management to take the company to the next level.”

Since completing the buyout, HgCapital has overseen the appointment of an experienced management team led by chairman Dr Franz Scherer and chief executive Wolfgang Bruns, a former senior executive with Magna Corporation.

In December 2003 FTE acquired Automotive Products (USA), its main clutch actuation market rival. Earlier this year, it bought a small Slovakian business and entered joint ventures in China and Brazil in order to provide access to the fastest growing passenger car markets of Eastern Europe, South America and China.

Last week, HgCapital announced three promotions in its Frankfurt office, with Martin Block promoted to partner, Karsten Hartmann to director and Justin von Simson to associate director.