SHIP AHOY

A number of UK private equity firms have spent the summer loading up on boats – luxury boats to be precise. Marooned super yachts, luxury ferries and recreational motorboat groups have all been the recent targets of circling private equity investors eager to dip a toe in azure waters.

One of the groups recently risking doubloons in the sector is Permira, the European buyout fund that has a penchant for investing in Italian luxury boat makers. Last month, the firm launched a public-to-private bid to acquire luxury ferry maker Grandi Navi Veloci for €€522 million, taking control from the current largest shareholder, the Grimaldi family.

Permira's previous involvement in the sector came from its two-time ownership of another Italian luxury yacht company Ferretti. In a 2002 take-private, the firm acquired the company for the second time, having previously owned a 60 percent stake in the company, partially realised through an IPO in 2000.

In July, UK-based Duke Street Capital acquired French yacht accessories and equipment provider Navimo for a reported €120 million. Navimo provides a range of equipment and accessories for recreational yachts and motorboats up to 50 metres in size and has operations in 90 countries.

Also joining the rush for the pleasure boat sector this summer was pan- European house 3i, which acquired a 24 percent stake in Spanish boat maker Nueva Rodman for an undisclosed sum. 3i's investment has been earmarked specifically for the company's new range of larger cruise boats that are at least 16.5 metres long.

Nor is it just the vessels that are in demand. The recent acquisition of publishing house Boat International by UK-headquartered Henderson Private Capital showed that even magazines and book titles relating to the sector are hot property just now. Henderson is committed to investing €50 million in the group, which comprises titles as diverse as Coast, Sailing Today and Captain's Log. With a stated intent of “creating a world class portfolio of luxury yachting and marine titles”, Henderson will be hoping that life on the ocean waves will indeed prove plain sailing.

Clearly, luxury boating is in vogue. Increased leisure time and more disposable income across Europe mean that the sector expects a bright future. And with the private equity arm of US investment bank Bear Stearns recently announcing plans to team up with Italian private equity firm Opera to invest in, among other things, high-performance boats, deals are likely to keep coming.

PHOENIX DOUBLES UP ON HPI IN 14 MONTH
Norwich Union Insurance has bought UK-based car status information provider HPI from Phoenix Equity Partners for £120 million (€180 million; $220 million). Phoenix acquired HPI in June 2003 in a secondary buyout from pan-European firm 3i, paying £31 million for a 70 percent stake in HPI and made a return of just over 2x investment on the sale. The deal was led for Phoenix by chairman David Gregson and investment manager Andrew Deakin. 3i had originally backed HPI in December 2000, investing £27 million in the business and selling its stake to Phoenix in 2003. Phoenix's investment was made from its £300 million Phoenix Equity Partners IV Fund.

IK BUYS €300M NORWEGIAN DISCOUNT RETAILER
Industri Kapital has completed its fourth investment in Norway, acquiring the assets of Norwegian wholesaler Terje Høili and the franchise rights to Norwegian discount retail chains Europris and Max 20. The value of IK's stake was not revealed, but the transaction had an enterprise value of approximately €300 million ($370 million), according to a source close to the deal. The three companies had a combined turnover of approximately NOK3.25 billion (€393 million; $486 million) in 2003.

The investment is IK's fourth in Norway, having previously backed car rental company Liva Bil, auto components supplier Kongsberg Automotive and current portfolio company Dyno Nobel, a manufacturer of commercial explosives.

EUROPEAN MEZZ INVESTMENT SLOWS
Mezzanine investment in Europe decreased to €985 million ($1.2 billion) in the first six months of 2004, down from €1.5 billion in the second half of 2003, according to data commissioned by Mezzanine Management and compiled by Initiative Europe.

The figures reflected a quieter buyout market in the first half of 2004, with no subordinated debt tranches above €200 million and fewer of the major LBO transactions that shaped the 2003 buyout environment. The UK mezzanine market fell below its counterparts in Germany and France, representing only 20 percent of total European mezzanine investment in the 12 months to June 2004, a decrease from 34 percent in 2003. The use of mezzanine in non-buyout deals increased by 60 percent in the first half of 2004.

COMPASS BUYS ITALIAN FRIDGE MAKER
The London-headquartered private equity firm has completed its eighth European transaction from a $1 billion (€810 million) fund dedicated to the region, acquiring Italian refrigerator heat exchanger maker Eco for an undisclosed sum. The secondary buyout was made from a consortium comprising Italian private equity houses PM & Partners, BS Private Equity, Italian Private Equity Fund II, BNL Investire Impresa and current management, which had owned Eco since 2001. Financial details of the transaction were not disclosed. However, BNL Investire Impresa reportedly sold its 13 percent stake in the company to Compass for €22 million, implying an enterprise value of the business of approximately €170 million.

3I COMPLETES SECOND LARGEST UK RETAIL BUYOUT OF YEAR
The pan-European firm has sold Pets at Home, the UK pet food and products retailer for £230 million (€345 million; $430 million) to UK midmarket buyout firm Bridgepoint, providing a 3.5x return for the group. The deal is the second largest private equity-backed UK retail buyout of the year behind the £699 million take-private of fashion retailer New Look by Permira and Apax Partners in March. The transaction was led by Manchester-based Keven Parker, director of new investments for the North of England and Scotland.

Meanwhile, 3i's acquisition of a minority stake in Novem Car Interior Design has pushed its total investment in Germany this year to €270 million. The firm bought approximately one-third of the shares in the German car interior manufacturer from AlpInvest which acquired the company in February from funds advised by CVC Capital Partners and Goldman Sachs in a deal valued at €200 million.

3i has also fully exited technology component company €2v technologies through an IPO on the London Stock Exchange. Sources close to the transaction said that 3i had made approximately £60 million profit or 2.5x money invested on the float of the company.

ARGUS SELLS HUNGARIAN CABLE STAKE TO WARBURG PINCUS
Warburg Pincus has acquired a majority stake in Hungarian cable operator FiberNet in a transaction valued at $72 million in a rare Eastern European LBO. Argus is believed to have realised a money multiple return of 2.6x its original 1999 investment of $12.5 million, according to a source close to the transaction. Warburg Pincus' undisclosed equity investment is part of an overall finance package that includes new funding to allow business expansion. Acquisition finance for the transaction was provided by Austria's Raiffeisen Bank. Argus' original investment was made from its $172 million Central European private equity fund, which closed in September 2000 and is understood to be approximately 80-85 percent committed at this stage.

MONTAGU BUYS SURVITEC FROM ALCHEMY
Montagu Private Equity has completed the secondary buyout of survival technology company Survitec Group from Alchemy Partners in a £146 million (€217 million; $267 million) deal. Survitec was originally part of Wardle Storeys, a UK engineering group acquired by Alchemy in a £123 million public-to-private in 1999. Based in Dunmurry, Northern Ireland, Survitec designs, makes, distributes and services safety and survival equipment for the marine, military, aerospace and homeland security markets. Montagu, which has over £2 billion under management, was advised on the transaction by Deloitte (financial) and Hammonds (legal). Barclays Bank in Manchester provided debt funding for the deal.

London-based Alchemy Partners has achieved a spate of exits in 2004. Last month alone it sold hotel chain Paramount Hotels to Dawnay Shore Hotels in a £215 million deal and nursing home operator Four Seasons to Allianz Capital Partners in a £775 million transaction that delivered four times the original capital.