HSBC Private Equity, the private equity arm of the UK bank HSBC, has backed the £125m management buyout of London-based aerospace and medical conglomerate Smiths Group's air movement and cable management business.
Japanese bank Mizuho is providing the debt, representing approximately 65 per cent of the transaction value. The rest consists of equity from HSBC Private Equity and management, led by Kevin Sargeant, who has been managing director of the ventilation business since 1988.
Smiths Group, which is made up of four divisions, decided to sell its ventilation and cable management businesses in an effort to focus on its core aerospace and medical equipment business, based in the UK.
Jason Gatenby, investment director at HSBC Private Equity who led the investment, said the firm first became aware of the deal in March this year, when they approached Smiths Group before the company announced its disposal programme. Smiths Group later invited HSBC Private Equity back in July on the back of their experience in this sector, Gatenby said.
The ventilation business, which include brands Vent-Axia, Roof Units, Airstream, Sifan and Torin, supplies extractor fans, ventilation systems and blowers to retail and commercial industrial makers. The cable management business includes Adaptaflex, Kopex and Elkay brands. The combined businesses, which employ approximately 1000 people, had sales of around £105m in 2001.
Commenting on the firm's plans for the business going forward, Gatenby explained: 'We plan to grow the Vent-Axia brand into air conditioning for smaller businesses. On the cable side, we think there is a good opportunity to expand into the US, partly driven by new legislation.'
HSBC Private Equity' Neil Graham and Mahmoud Atalla worked on the deal alongside Jason Gatenby. It is the third investment funded by the firm's third buyout fund, a £1.2bn European vehicle which raised £600m from third parties to add to another £600m from HSBC Group.
HSBC Private Equity is believed to be negotiating a management buyout of the business with its parent. HSBC Private Equity would not comment on the current status of these negotitions.