Morgan Stanley back in European private equity

The bank’s private equity arm is the lead investor in an agreed equity purchase in Breitenfeld, a niche steel producer in the Austrian region of Styria.

Morgan Stanley Private Equity (MSPE) and BAST Investment Group have agreed to buy a 38.5 percent stake in Breitenfeld, a specialist steel maker based in the Austrian region of Styria.

It is Morgan Stanley’s first private equity investment in Europe following the spinout of Metalmark, its former buyout arm that has since been absorbed by Citigroup.

Under the deal, MSPE will own about 90 percent of the equity changing hands, with BAST coming in as a smaller minority investor. The two sponsors are buying their stake from the two endowments controlling the company, Fides Privatstiftung and Fortis Privatstiftung, which recently repurchased the shares from their previous owner, DZ Equity Partners.

“The pipeline for deals is good all over Europe, but especially also in Germany-speaking countries. We're busy talking to business owners with ambitions to grow, succession issues and pre-IPO plans.

Michael Hehn, Morgan Stanley Private Equity

Fides Privatstiftung remains the company’s majority owner. It is controlled by Rudolf Jurak, Breitenfeld’s CEO.

MSPE was introduced to the deal by its banking parent. No financial details have been disclosed. A spokeswoman for Morgan Stanley declined to provide information about the financing for the deal.

The strategic rationale underpinning the investment is a plan for Breitenfeld to go public “in the medium term”, according to a press release.

Breitenfeld is 65 years old and makes steel products for clients in power generation, oil and gas, mechanical engineering, transportation and tool steel. The company’s biggest markets are Italy, Austria and Germany.

Michael Hehn, who led the investment for MSPE, described Breitenfeld as a well-positioned supplier to industries that are enjoying high growth. As a result, the company has managed to grow sales by 30 percent annually for the past three years and is now aiming to end fiscal 2008 at the end of June with expected sales of €260 million and EBITDA between €50-€60 million, he said.

Hehn also said the company was planning to invest €70 million in the next  12  months as part of an effort to expand its existing capacity.  Morgan Stanley Private Equity will support these plans and pursue international growth through value creating acquisitions, he said. 

Commenting on the current investment environment, Hehn said: “The pipeline for deals is good all over Europe, but especially also in Germany-speaking countries. We're busy talking to business owners with ambitions to grow, succession issues and pre-IPO plans. The pace of dealmaking isn't fast, because price expectations vary and no-one has a clear view on the economy. But we are having very interesting conversations.” 

According to market sources, MSPE is in the process of raising a new global private equity fund with a $6 billion target. $2 billion is thought to have already been committed by the bank. Morgan Stanley did not comment on the fundraising.

BAST Investment Group, a privately owned Austrian financial services and investment company, described the transaction as its fourth and largest industry deal to date. BAST was founded 18 months ago by Barbara Wösner-Sandberg and Stefan Zapotocky.