LDC maintains run rate with twin deals

LDC, the captive private equity arm of Lloyds TSB Banking Group, has maintained its recent deal-making spree with two acquisitions, taking its deployed capital in 2011 alone to £163m.

Lloyds Development Capital (LDC) has acquired majority stakes in industrial chemicals group A-Gas and cloud computing business UK2 Group.

The deals are LDC’s fifth and sixth this year as the firm builds on a busy 2010 in which it returned more than £650 million and deployed in excess of £250 million across 11 deals.

The A-Gas deal represented a full exit for private equity firm Growth Capital Partners. The firm declined to comment on its return, but a source with knowledge of the deal said GCP had more than doubled its money on the investment, which delivered an internal rate of return of about 25 percent. 

The £70m deal for A-Gas gave LDC a majority stake in the business. Debt funding for the deal was provided by HSBC, RBS and the acquisition finance division of Lloyds Bank Corporate Markets.

The UK2 deal was valued at £47 million for a majority stake, LDC said. The company provides domain name registration and web-site hosting services.

We're an integral part of Lloyds Banking Group, are very much in business and have no plans to spin out.

Kunal Dasgupta

Kunal Dasgupta, investment director at LDC, explained what attracted the firm to the UK2. “What made the company interesting was its strong and sustained track record in cloud computing. They had developed proprietary technology, and were able to make complex products easier for people to use.

“The hosting market is pretty fragmented. Our investment thesis is based on market consolidation, a focus on innovation, and taking it to the next stage of growth. We want to grow it so that it’s in a position to become market leader. We will use it as a platform for further bolt-on acquisitions – you can buy other providers quite cheaply and capitalise on synergies. We also hope to bring about a more targeted approach to marketing,” he added.

Dasgupta said the firm plans to deploy about £200m in the technology media and telecoms sector over the next two years.

Responding to questions about whether LDC had plans to follow other captive buyout units like Barclays Private Equity in becoming independent, he said: “We’re an integral part of Lloyds Banking Group, are very much in business and have no plans to spin out.”