Having once said that the best way of conducting investor relations was “by chequebook”, Jon Moulton, managing partner of UK private equity firm Alchemy Partners, must be keeping his investors very informed, judging by the firm's recent disposal activity.
Since the start of the year, Alchemy has made four exits from a diverse collection of assets. The realisations generated a reported £275 million (&€407 million; $486 million) in cash.
First in line was the February sale to management of the Grenadier Group, a European designer of business forms and related products in February, which returned over 2x Alchemy's £4.6 million investment in 1998. The deal was closely followed by the AIM flotation of IT software provider, Civica, in March, which returned £30 million.
Next up, in May, were Riverdeep and Goldsmiths. The sale of its stake in the former, an Irish publisher of educational and productivity software, netted Alchemy $175.4 million (&€146 million), a two-fold return on its original investment of $87.7 million. Most recently, Alchemy reaped £78 million from the sale of Goldsmiths, the UK jeweller, to Icelandic retailer Baugur Group, a 3x investment return on its original 1999 engagement.
The beneficiaries of these distributions, alongside the firm's staff, are a collection of blue-chip investors in the Alchemy Investment Plan, a vehicle nearly as unconventional as the company's colourful founder himself.
Unlike the close-end limited partnership that is the industry standard, the plan is an evergreen structure with “£255 million per annum indicative capacity”. Investors commit a minimum £2 million on a rolling 12-month basis. Participants pay fees based on a budget that Alchemy prepares each year, as opposed to the standard management fees charged by most partnerships.
Investors in the plan, which include Standard Life, The Wellcome Trust, General Motors, CalSTRS and the College of the Holy Cross among others, will undoubtedly welcome the recent wave of disposal activity.
And there is more to come. According to a source close to the firm, Alchemy is poised for three more realisations that are currently in “final negotiations”.
One of these might well be one of the more unusual investments the firm has made. In 1998, when other houses were dreaming of striking it rich in the tech sector, Alchemy put money into ATH Resources, a Scottish open cast coalmine. A £1.5 million follow-on investment was made in November 2003. Now that the business is preparing for an AIM listing this month, don't be betting that there ain't gold in them thar hills ….
DOUGHTY ANNOUNCES IPOS
The UK buyout firm which is currently raising a new &€3 billion ($3.6 billion) European buyout fund, has made two IPO announcements in quick succession. It will seek initial public offerings of Auto-Teile- Unger (ATU), a German operator of specialised automotive parts stores and repair shops, on the Frankfurt Stock Exchange and football clothing and equipment business Umbro on the London Stock Exchange, both by the end of June 2004.
According to analysts, the German IPO is expected to value ATU at around &€1.5 billion and deliver a return of between two to three times equity invested for Doughty, which bought the company in a deal worth about &€900 million in June 2002. Analysts said the Umbro IPO was expected to value the company at around £200 million. Doughty backed a £90 million buy-in at the business in April 1999 and has increased EBITDA by 180 percent to £20.2 million in 2003.
The IPOs may deliver a timely boost to Doughty's fundraising effort. In September last year, at the first closing of its Doughty Hanson IV fund, the firm had raised around &€700 million towards a &€3 billion target.
ALCHEMY IN RIVERDEEP DOUBLE, GOLDSMITH TRIPLE
The London-based private equity firm has completed two exits from portfolio companies within a week. The firm first made a rapid and profitable realisation from Riverdeep, the Irish publisher of educational and productivity software. Alchemy invested $87.7 million (&€73.7 million) in Riverdeep in April 2003 in exchange for a stake of around 20 percent as part of a public-to-private buyout that valued the company at just over $376 million. It has now sold that stake to the firm's majority equity holders for $175.4 million, producing a multiple of about two times capital invested and an internal rate of return of 102 percent.
From its sale of Goldsmiths Group, the UK jeweler, Alchemy has also earned £78 million, almost three times its original investment since it backed a management buyout in 1999. Goldsmiths was sold to Baugur Group, Iceland's biggest retailer for £110 million. The sales bring the total of Alchemy's four realisations in 2004 to approximately £275 million.
INDUSTRI KAPITAL SELLS FURTHER STAKE IN ALFA
Pan-European private equity firm Industri Kapital (IK) has sold a further batch of shares in portfolio company Alfa Laval, the Swedish fluid control systems maker listed on the Stockholm Stock Exchange. The Industri Kapital 2000 Fund has sold 10,500,000 Alfa Laval shares at SEK111 per share to a range of Swedish and international institutional investors for a total of &€125 million ($149 million). IK originally invested &€280 million in the buyout of Alfa Laval from Tetra Laval in June 2000 and the deal has so far delivered total proceeds of &€406 million. The firm's remaining 8.5 percent stake in Alfa Laval, which listed in Stockholm last year, is valued by the latest transaction at around &€115 million. IK held a first closing of its latest fund, IK 2003, at &€500 million in 2003 and is aiming for a final closing this year.
PERMIRA BUYS DEBITEL STAKE FOR €640M
The London-based private equity firm has agreed to pay &€640 million ($765 million) for Swisscom's 95 percent stake in Debitel, the German telecommunications company. The deal is expected to complete in June subject to the approval of antitrust and monopolies commissions. The financing for the deal includes a &€210 million vendor loan note provided by Swisscom. The vendor will also offer Debitel's remaining shareholders a voluntary public bid at a price of &€11 per share in cash. Swisscom bought Debitel for around $2.5 billion in 2000, but much of the original value has since been written off amid the general downturn in the telecoms sector.
Last month, Permira submitted a £940 million offer for UK high street retailer WH Smith and is currently undertaking preliminary due diligence, although Cinven, the ([A-z]+)-based private equity firm is reported to be preparing a counter-offer. In October 2003, Permira closed Permira Europe III, Europe's largestever private equity fund, on &€5.1 billion.
CANDOVER, LGV EXIT EARL'S COURT FOR £245M
Candover and Legal & General Ventures (LGV), the European private equity houses have sold their stakes in Earls Court & Olympia, a London-based exhibition venue and event organising company in a deal worth £245 million (&€364 million; $440 million). The European private equity houses have sold to a consortium comprising St James Capital and Nomura International. Candover invested £30 million from the £850 million Candover 1997 fund alongside a £4 million investment from Candover Investments. LGV invested £10 million in September 1999 alongside them. The Candover 1997 fund is fully invested and the deal represents the ninth full exit from the fund to date. The EC&O transaction is LGV's fifth disposal in the last three months and the investment was made from the £200 million LGV 1999 fund.
CVC EXITS TRENCH IN $340M TRADE SALE
The European private equity firm has agreed to sell the entire share capital of Trench Electric Holdings, a high voltage components manufacturer, to Siemens, the German electronics group, for $340 million (&€285 million). CVC acquired Trench in an MBO from BBA, the aviation services provider, in September 1997, in a transaction valued at $266 million. The sale is expected to complete in the second half of this year, subject to receiving regulatory approval. Trench Electric is a UK-headquartered, global power engineering company, incorporating the design of specialised electrical products. Last year, the company posted sales of $280 million and operating income of $42 million. CVC is currently investing from its &€4.65 billion CVC European Private Equity Partners III Fund, which closed in June 2001 and is more than 50 percent committed.
CHARTERHOUSE TO BUY AUTOBAR FOR &€800M
The London-based buyout firm has beaten off competition from BC Partners to purchase Autobar, a ([A-z]+)-based packaging and vending machine company, from the Kuwaiti Investment Authority for more than &€800m ($960 million). The sale of Autobar is subject to regulatory approval. The company had sales of &€1.18 billion in the 12 months up to March 30, 2003. The transaction represents Charterhouse's first acquisition since August 2002, when the firm bought UK betting chain Coral Eurobet from Morgan Grenfell Private Equity for £860 million (&€1.3 billion; $1.53 billion). Coral was refinanced earlier this year by Lehman Brothers and HBOS, returning £160 million to Charterhouse. Following its spinout from HSBC in 2001, Charterhouse closed its latest fund, Charterhouse Capital Partners VII, on &€2.7 billion in July 2003.