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LMS Capital makes almost 5x in crane sale

LMS scores an impressive return on its investment in an offshore crane business, which it has expanded globally.

LMS Capital, an evergreen AIM-quoted private equity manager, has sold its entire holding in Energy Cranes International to a management buyout team backed by Close Brothers Private Equity.

The transaction gives an enterprise value to Energy Cranes of £142 million ($283 million; €178.2 million) and the net proceeds to LMS are £83 million in cash, which will be used to develop LMS’s investment portfolio and used for general corporate purposes.

LMS’s return on equity from its investment in Energy Cranes is approximately 4.5 times, with an internal rate of return of approximately 40 perecent.

Energy Cranes was formed in 2003 when LMS acquired Sparrows Offshore and several months later merged the business with American Aero and Titan Cranes, based in the Gulf of Mexico.

LMS’s equity investment in the two transactions totalled £17.8 million.

Martin Pexton, managing director of LMS, told PEO: “Our aim was to increase margins and to expand the business internationally. The business had made some inroads into global expansion before we came on board. We were able to commit more resource to becoming a global provider.”

The acquisitions were funded through bank debt. They included businesses both in the Gulf of Mexico (Dynamic Cranes in 2006, Marine & Mainland in 2007) and in the North Sea (Aberdeen Hydraulics in 2007).

The company has a presence in many further locations including the Caspian, the Middle East, West Africa, Brazil, and Asia-Pacific. Employees now exceed 1700.

Energy Cranes’ turnover has nearly doubled during the last five years to approximately £114 million for the year ended 31 December 2007, while profitability has increased at an even greater rate. Pre-tax profits for 2007 were £2.7 million and net assets at the year end were £18.8 million.

On 26 March 2008 LMS released its preliminary results for the year ended 31 December 2007 at which point the company’s net asset value per share was 101 pence. The company has updated its NAV per share following the sale of Energy Cranes to a pro forma figure of 107 pence.