News: Deals

Legrand deal hits home straight
US buyout firm Kohlberg Kravis Roberts and French investment vehicle Wendel Investissements have confirmed that they are in exclusive talks to acquire French plug and switch maker Legrand from Schneider Electric. Wendel Investissements is backed by Compagnie Generale d'Industrie et de Participations (CGIP) and CGIP's parent Marine Wendel. In a joint statement, the firms have revealed that a price of €3.7bn has been agreed with Schneider, which, coupled with Legrand's debt of approximately €1.3bn, would value the French firm at around €5bn.

Negotiations over the exact price have a 22 July deadline, with final completion of the deal scheduled for year end, subject to competition authorities' approval. The announcement would seem to rule out the possibility of Schneider appealing against the European Commission ruling that blocked the merger of Schneider with Legrand last October. The Commission has given Schneider until the end of January 2003 to dispose of Legrand.

Cinven and CVC deliver strong exit with William Hill IPO
With the benefit of hindsight, the timing of the IPO of William Hill on 17 June could not have been better. With the public markets still unnerved by the Worldcom revelations and the flotation of both Focus Wickes and Yell being put on hold by their private equity owners, Cinven and CVC Capital Partners can afford to be well pleased that the UK betting shops business hit the market when it did. Investors responded positively from day one, lifting the share price by as much as 17 pence (7.3 per cent) from a launch price of 225 pence on that first day. The price gain lifted the company's value from £950m at launch to over £1.04bn and the issue was reported to have been over 10 times over-subscribed.

The owner of the second largest network of betting shops in the UK raised £700m in the offering which was jointly led by Deutsche Bank and Schroder Salomon Smith Barney. The price of 225 pence was at the higher end of the 190p to 240p range set during the price talk. The company raised £340m in the IPO, which it intends to use to pay off debt and buy more betting shops. Cinven and CVC, who jointly owned 90 per cent of the business, raised nearly £300m from the IPO and have the option to sell a further £96m of shares. They would hold 18 percent of William Hill if the option is exercised in full.

CD&R to buy Brake Bros
Brake Bros, the publicly?listed UK catering firm, has agreed to a £433.7m ($653m) cash offer from US buyout firm Clayton, Dubilier & Rice (CD&R). The acquisition is being made by CDRP Acquisition, which will pay 825p a share for the company. This is a 39 per cent premium to the group's share price of 8 March, the day before the company announced that it would conduct a strategic review of its business. This review was prompted by the announcement of chairman Frank Brake that he intended to retire.

It was reported that the offer was unconditional as the Brake family, which owns 59 per cent of the shares, agreed not to consider any other offers for the business. Rumours then surfaced that other private equity buyers were keen to bid for the business but no evidence of a concerted buying programme of the company's remaining shares has emerged. The acquisition will net £256.5m for the family. The company's share price jumped nearly 9 per cent on news of the acquisition, gaining 70p to 817.5p. Brake Bros shareholders, who have been guaranteed their final dividend of 11.38p, are also being offered a loan note alternative to the cash. Brake Bros is being advised by Credit Suisse First Boston and CD&R is being advised by Merrill Lynch.

Nikko completes UK sale-leaseback deal
Nikko Principal Investments (NPIL), the European principal investment arm of Nikko Cordial, has completed the purchase of 20 UK private hospitals owned by the Swedish listed healthcare group, Capio AB, for £250m. Capio acquired the 20 hospitals in 2001 as part of its acquisition of Community Hospitals Group, the UK's fourth largest private hospital operator. The hospitals will be held through a limited partnership structure, which will be owned 80 per cent by NPIL and 20 per cent by Capio. The properties have been leased back to Capio on a 30-year lease, with an agreed annual rent increase. This deal is the first of its kind carried out by a UK major private hospital operator. NPIL chief executive Brian Berry said the firm was hoping to make strong returns on the UK's growing private healthcare sector.

NPIL, the European principal finance arm of Nikko Cordial Corporation, looks to use the capital base of Nikko Cordial Corporation (previously The Nikko Securities Co Ltd) as it makes investments across Europe. The firm says it is looking for companies and asset portfolios where it can optimise the cost of capital and improve operational effectiveness through restructuring of assets and management. It is targeting companies in the transport, financial, healthcare, property and leisure sectors.

Phoenix Equity acquires UK healthcare company
A management team backed by Phoenix Equity Partners has acquired Abbey Hospitals Group, a UK-based independent group of private hospitals based largely in the north of England and Scotland. The transaction value is thought to be in the region of £25m. A new company, Covenant Healthcare, has been formed to acquire the firm. Senior debt was provided by Bank of Scotland Corporate Banking and PricewaterhouseCoopers advised on the deal.

The acquisition follows Nikko Principal Investments' recent purchase of 20 UK private hospitals owned by the Swedish listed healthcare group, Capio AB, for £250m (see above). June also saw the completion of the 3i-backed management buyout of Westminster Healthcare for £270m.

Phoenix managing director James Thomas said the healthcare sector in the UK offered a great deal of opportunity to investors. ?There has been an increased level of spending on healthcare, both in the public and private sectors, which makes it a potentially lucrative sector to be involved in. It is an attractive sector although the quality of management needs to be very high to be successful.? Thomas added that the firm was looking to make further acquisitions, possibly in the psychiatric healthcare sector, although all options were open to consideration.

LGV leads Jeyes MBO
Legal & General Ventures, the UK private equity firm, has formed a joint venture with IWP International to acquire IWP's household products division through a management buyout. The new business, Jeyes Group Ltd, produces household cleaning products with a market share in the UK of around 15 per cent. The firm is being acquired debt-free in a transaction that values the business at €134.2m. For the year ended 31 March, Jeyes achieved operating profit of €16m on sales of just under €300m. The deal sees IWP retain a 35 per cent stake in the firm, with LGV and the management team, led by chief executive Mike Colley, acquiring 44 and 21 per cent stakes respectively. Jeyes Group will be financed by way of €2m of ordinary share capital, €62m of bonds and €85m of bank debt, provided by Bank of Scotland, Barclays and Scotiabank.

Ivan Heywood, managing director of LGV, said the acquisition continued the firm's interest in investing in strong consumer products companies. The deal is LGV's third large transaction in 2002. The firm acquired French casino operator Moliflor Loisirs for a price in excess of €400m in March, a month which also saw the completion alongside Cinven and Princes Gate Investors of the €3.2bn acquisition of the Unique and Voyager pub chains. Recent exits for the firm include the sale of Young's Bluecrest, Santé Finance and Espace Verts.

3i buys into ABA Sweden
3i has agreed to buy a 47 per cent stake in Stockholm headquartered ABA Group, a major manufacturer of hose and pipe sealing products for the distribution and automotive sectors. The terms of the agreement were not disclosed.

Vestar buys Electrolux division
Vestar Capital Partners, the US private equity firm, has acquired Zanussi Metallurgica from Electrolux Group through its Vestar Capital Partners IV fund, for an undisclosed price. The transaction is the first European deal to be completed by the firm. Based in Milan, Zanussi Metallurgica produces cast-iron and aluminium components and enamelled copper wire used in the household appliance and automotive industries. The company last year reported turnover of €140m. Robert Rosner, chairman of Vestar Europe said the acquisition of Zanussi Metallurgica is the first of a series of important acquisitions to be made by the firm in Europe. ?The recent opening of offices in Paris and Milan will enable to pursue our European growth programme.?

Vestar Capital Partners currently manages $4bn of capital and has a portfolio of 19 companies. The sale by Electrolux is the second major disposal carried out by the firm this year. In January the white goods manufacturer sold the remaining units of its leisure appliances business to private equity firm, EQT Partners.

Doughty Hanson acquires ATU Auto
Doughty Hanson has acquired a majority interest in Auto-Teile-Unger Group (ATU), Germany's largest independent car parts stockist and auto repair company. The price has not been disclosed. ATU reported turnover of around €1bn in 2001 and employs 10,000 people. Doughty Hanson confirmed that existing management will remain with the company to develop the business following the acquisition. ATU's founder Peter Unger will remain a shareholder in the business.

Texas Pacific mulls rival Smurfit bid
US private equity firm Texas Pacific Group may put in a counter bid against Madison Dearborn Partners' €3.7bn deal to buy Irish packaging group Jefferson Smurfit Group, according to news reports in Ireland. Rival US private equity firm Madison Dearborn has agreed terms with the board of Smurfit over its €3.26 per share offer that values the Irish packaging firm at €3.7bn. Smurfit has confirmed that it had received one other approach, although the identity of the bidder was not revealed. A report in the Irish Independent newspaper suggests that Texas Pacific, headed by Irish budget airline Ryanair chairman David Bonderman, ?has made an approach which could lead to a competitive bid [for Smurfit].?

3i in $40m oil deal
The Aberdeen office of 3i has long been an active investor in the oil and gas sector and it has just invested $40m in Petrofac, which provides surface facilities for the oil and gas production, processing and refining industries. The company operates in the US, the Middle East and Britain, and has over 1,000 employees. It is forecasting $450m in sales for 2001. 3i's investment in the group coincides with a first equity participation project for Petrofac, a $1bn gas field development in Algeria which is also funded by BHP, Sonatrach, Japan National Oil Company and Woodside Petroleum.

Argus Capital buys Ster Century cinemas
Argus Capital Group, the Central Europe focussed private equity arm of Prudential Investment Management, has bought the multiplex cinema interests of Ster Century Europe Ltd in Budapest and Prague for $16.5m. The firm said that it would also go on to buy the Slovak cinema of Ster if local authorities give their approval. Ali Artunkal, managing director of Argus Capital Group said that the cinema business delivered good cashflows and that discussions were being held with several local banks in order to add a little ?light leverage? to the operation. Argus Capital Group is part of Prudential Investment Management, which is the asset management division of Prudential Financial.

Sovereign buys education assets
Sovereign Capital has completed the £25m acquisition of UK private education business Davies Laing & Dick (DLD), which is a private school operator that owns eleven schools and colleges across the UK. The deal is the second such transaction to be completed from the firm's latest fund, the Sovereign Capital LP III, which closed at over £120m in early May 2002. Sovereign led a £20m MBO of Community Homes of Intensive Care and Education (CHOICE), a UK healthcare services company in April.

Deutsche Beteiligungs adds to industrial portfolio
Deutsche Beteiligungs has invested €24m to acquire RHI AG, a Vienna-based engineering business which specialises in facilities and components used in hightemperature manufacture of iron, aluminium or power generation. Deutsche, and a co-investing fund managed by it, invested in the business to add to an industrial engineering portfolio that already comprises Lignum Technologie (which in 2001 was forced to postpone its IPO) as well as DS Technologie and Andritz.

Permira acquires Wagon storage division
Permira has led the acquisition of the storage systems division of Wagon for a price of £60m. The firm formed Whittan Investments, a firm set up with debt financing from Bank of Scotland and Royal Bank of Scotland, to acquire the Wagon subsidiary, which provides storage solutions across Europe. Wagon is disposing of this division as part of its strategy to focus on core activities in the automotive manufacturing industry. The division reported sales for the year ended 31 March 2002 of £126.5m with operating profits of £10.6m.

Italian firms net €100m olive oil deal
Italian private equity firm B&S Private Equity is the lead sponsor in the €101m buyout of olive oil manufacturer Carapelli from French company Cereol. B&S has acquired a 59 per cent stake in the business with coinvestors Arca Impresa Gestioni SGR (Arca) and the banking group Monte dei Paschi di Siena acquiring 27 per cent.