Montagu nears £900m Linpac buyout

The newly independent UK private equity house, having beaten off competition from BC Partners and Apax, is close to acquiring the UK packaging business.

Montagu Private Equity, the private equity house formerly known as HSBC Private Equity which spun out of HSBC Bank, looks set to announce its second deal since gaining independence after it emerged it has entered into exclusive negotiations to acquire UK family-owned packaging group Linpac.

 

Montagu is reported to have offered £900m for the business, beating off competition from UK rivals BC Partners and Apax Partners. The Financial Times reports that the two groups entered into exclusive talks earlier this week, although the deal is not expected to complete until the autumn.

 

Montagu has declined to comment on the transaction.

 

CVC Capital Partners and Candover held discussions with Linpac at an earlier stage but decided not to bid. Earlier this year, The Times newspaper reported that JP Morgan Partners submitted an offer but did not make the shortlist.

 

Linpac, based in Lincolnshire in England, is a packaging, materials handling and automotive components business with £1bn in turnover. Among the company’s activities is the manufacture of including fast food boxes, shipping crates, plastic automotive parts and other corrugated and paper packaging. Linpac employs 11,000 people across eight units, with operations on five continents.

 

In March, the company, which is being advised on the transaction by Deloitte & Touche, teamed up with two other corrugated packaging companies to form a new unit for expansion in Southern Europe.

 

The £900m transaction will be financed with debt financing from Deutsche Bank. The Cornish family are expected to re-invest around £120m as part of a recapitalisation of the business in return for a minority stake. A mezzanine debt tranche is also reported to be included in the financing. Around £580m of the proceeds of the sale will be distributed among 30 family members, said the Financial Times.

 

In late May, Montagu completed its first transaction since gaining independence, acquiring UK food manufacturer Marlow from AstraZenca for £70m. The firm is investing from a E2bn buyout fund, which closed in October 2002. HSBC retains a 20 per cent interest in the business.