Another year, another high-profile private equity pursuit of a British highstreet icon. In February, London-based equity houses Apax Partners and Permira revealed terms of a 348 pence per share offer for listed UK fashion retailer New Look, valuing the company at just under £700 million (€1.03 billion; $1.32 billion).
The offer is at a 36 per cent premium to New Look's share price of 255 pence on 7 July 2003, the day when news that New Look founder Tom Singh was considering taking the business private first broke.
Singh, who currently controls a 28 per cent stake in the company, New Look managers and the equity sponsors are bidding through Trinitybrook, a new vehicle set up to complete the acquisition.
Apax had been itching to make a move for the business ever since Singh opened talks with the firm in May last year. When Trinitybrook's terms were finally published, a source based at Apax' Mayfair headquarters said there was a palpable sense of relief around the place: “At last we can all talk about this now.” Clearly eight months of having to keep quiet weren't easy to handle.
Soon after agreeing with Singh in principle that an offer should be made, Apax began looking for a partner. Initial talks with Texas Pacific Group come to nothing, so Apax turned to fellow UK buyout heavyweight Permira. The Covent Gardeners jumped at the chance to make up for last year's disappointment of coming second in last year's controversial battle for Debenhams, another UK retail household name.
The offer for New Look takes the form of a scheme of arrangement, the same structure that was also used in the Debenhams public-to-private.
Permira, whose involvement in the deal is led by retail specialist Martin Clarke, will be confident that things will be different this time around. Singh is New Look's largest shareholder, and his being on board should do plenty to tip the balance in Trinitybrook's favour. Apax' effort is led by Alex Fortescue.
To succeed, Trinitybrook requires shareholders owning 75 per cent of New Look's issued equity capital to accept the offer. The transaction is scheduled to complete in April.
Apax and Permira are planning to invest £100m each in return for a 30 per cent stake in the business. Both houses are setting aside capital for further acquisitions. Tom Singh and his family will own a 23 per cent interest.
HypoVereinsbank, HSBC and Credit Suisse First Boston have been instructed to arrange debt financing for the deal.
CANDOVER DOUBLES MONEY ON CLONDALKIN
Candover has continued the steady flow of exits from its Candover 1997 Fund, selling its entire stake in Irish packaging group Clondalkin to Warburg Pincus as the latter seeks to step up its activity in the European buyout market. The €630 million deal marks Candover's seventh full exit from the 1997 fund, which had raised £850 million (€1.245 billion; $1.55 billion) in December 1997. Candover has not disclosed the exact profit, but confirmed that the transaction generated a return in excess of two times. “It's a terrific return on our investment,” said Ian Gray, a director at Candover. “Delisted firms have not always achieved good returns for investors. We paid a 40 percent premium to delist the business, and to more than double our money shows that we had identified an undervalued asset.”
SPONSORS BET ON CHEMICALS
Financial buyers have steadily increased their involvement in the European chemical industry in recent years, with private equity now accounting for up to 30 per cent of all deals done in the sector, says a report from KPMG's Private Equity Group. According to the report, private equity has historically accounted for five percent of total M&A in the sector by value. The figure rose to 20 percent between 2000 and 2002 and is now estimated to have climbed as high as 30 percent in 2003 with as many as 100 European chemicals companies under private equity ownership. As a result, financial buyers are expected to account for 40 percent of the estimated €1 billion of European chemical assets that will be for sale this year, KPMG said.
ENGLEFIELD LEADS £400M WIND DEAL
The London-based mid-market investor founded by former Warburg Pincus dealmaker Dominic Shorthouse has partnered with First Islamic Investment Bank to invest in a £400 million ($732 million; €582 million) UK wind farm project. The two will each take a 33 per cent stake in RWE Innogy's operating wind farm portfolio, the UK's largest green power generating business. Augusta Finance, a London-based independent merchant bank, advised on the deal.
charterhouse to recap Coral Eurobet
Charterhouse Development Capital has advised investors of a part-realisation of Coral Eurobet, the UK bookmaker it backed in a £860 million ($1.57 billion; €1.26 billion) buyout from Morgan Grenfell Private Equity in August 2002. Charterhouse will recoup 60 percent of the capital it invested in the deal through an £830 million recapitalisation arranged by Lehman Brothers and HBOS, which will repay £160m of capital to Charterhouse. The refinancing gives Coral an enterprise value of £1.35bn, an increase in value of more than 30 percent in less than two years.
HGCAPITAL BUYS RHEINMETALL UNIT FOR €115M
Hirschmann Electronics has been acquired from Rheinmetall in a €115 million ($147 million) management buyout led by private equity firm HgCapital. The deal, which is subject to regulatory clearance, is expected to complete in March. Trevor Bayley, who led the deal for HgCapital from its Frankfurt office, said Hirschmann was a “world-class company with a superb product range, an international customer base and excellent prospects”. Debt facilities for the Hirschmann deal were arranged and fully underwritten by NIB Capital and Bank of Ireland. HgCapital was advised by PricewaterhouseCoopers' Corporate Finance and Transaction Services units, Lovells and LEK.
INTERREGNUM SEEKS MAJORITY STAKES
The London-listed early stage investor has acquired Cellular Design Services in a deal valuing the engineering business at £1.5 million (€2.2 million; $2.75 million). “The acquisition of CDS is a clear step forward in the execution of Interregnum's strategy of taking principal finance positions in companies, as well as traditional venture capital investments,” said Ken Olisa, chairman and chief executive of Interregnum. The firm, which historically focused on acquiring minority stakes in venture capital-backed technology companies, last year said it would seek to acquire majority and principal finance positions in technology companies in order to have a greater impact on strategic and operational management.
PPM EXITS OXOID IN £177M TRADE SALE
PPM Ventures has completed its second transaction of the year, selling microbiology products supplier Oxoid to US trade buyer Fisher Scientific International. PPM originally acquired Oxoid in 2000 through a secondary buyout from Cinven in a deal worth £100 million ($186 million; €147 million). PPM Ventures had initially planned to float the business, and had hired Cazenove to advise on plans for a UK listing. “We had been working on an IPO for the business with Cazenove since the autumn,” said Sally Flanagan, an investment director at PPM. “We received an unsolicited approach for the business before Christmas and things have moved very quickly since then.” PPM said the sale to Fisher provided it with a return of 2.75 times money invested and an IRR of approximately 33 percent.
BARCLAYS BUYS DEBT PURCHASER FOR £100M
Cabot Financial, which buys portfolios of defaulted consumer debt from the likes of HBOS and Barclaycard, has been acquired by Barclays Private Equity for £100m (€146m; $184m). The management team, led by Ken Maynard and Glen Crawford, own a 20 percent stake in the business valued at £20 million. “Consumer debt balances have increased substantially over the last couple of years and we have no doubt that this will be a key driver in the growth of debt sale,” said Owen Clarke of Barclays Private Equity. “The UK's consumer indebtedness is still behind that of the US when measured as a proportion of personal disposable income.”
Vision Capital participated in the transaction for a minority stake in the business, while the financial markets team at Barclays provided senior debt. The management team and Barclays Private Equity were advised by Hawkpoint Partners. Barclays Private Equity was active in the financial services sector last year, leading the €235 million buyout of First Assist from Royal & Sun Alliance and selling Clydesdale Financial Services and Preferred Mortgages.
ITALY'S BS EXITS SEA-TRANSPORT INVESTMENT
Milan-based BS Private Equity has unloaded most of its stake in Società Trasporti Combinati, an Italian short sea transportation group. BS retains a 20 per cent stake in the business, while a new investor, Star Social Responsible Fund, a mediumsize closed-end fund sponsored by Efibanca Palladio Finanziaria, has become the majority shareholder. Management has retained a 21 percent stake. As a result of the sale, ending a three-year investment period, BS Private Equity reported an IRR in excess of 45 percent, a cash-to-cash ratio above three and a capital gain on cost of €14 million ($17.6 million).
3i backs €125m hyva buyout
Europe's largest venture capital provider has backed a management buyout of Hyva Investments, a Netherlands-based group of companies involved in the production and sale of loading systems and components for commercial vehicles. 3i has agreed to pay €125 million ($158 million) for the business in a deal funding with debt financing from ABN Amro, which has invested in Hyva since it was established in 1979.
APAX, JP MORGAN SELL TO HERMES
London's Hermes Private Equity has backed a secondary buyout of Merlin Entertainments, the European attraction operator and owner of the Dungeons and Sea Life brands, in a deal valuing the business at £72.5 million ($138 million; €108 million). The business is being acquired from funds advised by Apax Partners and JPMorgan Partners, which bought it in 1999 for $77 million. The deal is backed by a new banking package agreed with the company's existing bankers Hypo Vereinsbank has been appointed mandated lead arranger, and Royal Bank of Scotland. Apax and JPMorgan's return on investment has not been disclosed.