As scrutiny of private equity firms grows ever more intense, the industry is deeply in need of some feel good stories. Dunedin Capital Partners' backing of OSS Group in its fight against the UK's Environment Agency is arguably not a bad place to start.
London- and Edinburgh-based Dunedin took over OSS, which turns waste oil into a refined fuel, in 2000. Realising the company's product would be outlawed by European legislation planned for December 2005, OSS, supported by Dunedin, spent £3.5 million ($7.2 million) on research and development to expand its production plant in order to produce a fuel it understood would be compliant with the new regulations.
It wasn't long before those hopes were dashed. Andy McNair, managing director of OSS, recalls: “The Environment Agency provided us with positive noises, but then at the eleventh hour they said no matter what you do to waste oil it will always be waste.” Fortunately for OSS, Dunedin opted to support its portfolio company through a protracted and costly court case, eventually emerging triumphant in June this year in the Court of Appeal.
Describing the two-year legal fight as “a rollercoaster”, Brian Scouler, managing director of Dunedin, is pleased his firm stayed the course. “We initially committed capital expenditure to the project with no inkling it would be more complicated, yet we carried on fighting for it despite a number of setbacks in the courts. The process has been full of uncertainty in the last two years but now we have a business with real value,” he says.
Scouler adds: “This fuel is an ecologically and economically attractive disposal of waste oil in an environmentally friendly way. It saves the use of virgin natural resources, yet we were threatened by a gold-plated legalistic approach from the Environment Agency.”
Through its demonstration of unwavering loyalty and willingness to take on the bureaucrats, Dunedin might just have struck a meaningful blow in private equity's battle for the hearts and minds of a sceptical public.
TERRA FIRMA TAKES EMI PRIVATE
UK buyout firm Terra Firma secured the necessary 90 percent acceptance level needed in its £2.4 billion (€3.6 billion; $4.8 billion) bid for music group EMI. The result had been widely expected since Terra Firma reported it had nearly 85 percent acceptance five days before the deadline. Media reports suggested that deal underwriter Citi would refuse to provide debt funding if the offer did not attract 90 percent acceptance – a condition that is traditionally waived once shareholder acceptance has reached around 80 percent.
DUKE STREET TEAMS WITH EUROPA FOR CI TRADERS
Duke Street Capital, a pan-European buyout firm, and Europa Capital, a property investment firm, have completed the acquisition of CI Traders, the largest operator of consumer and leisure businesses in the Channel Islands. The buyout is unusual because it is a rare example of a pure private equity firm teaming up with a real estate investment manager to take over a company. Jersey-based CI Traders has an enterprise value of £410 million and is the result of a merger between two of the Channel Islands' biggest companies, Ann Street Group and Le Riche. The company also operates a consumer finance, hospitality and manufacturing and distribution business.
RUTLAND TREBLES MONEY ON PAWNBROKING
UK turnaround specialist Rutland Partners has sold Swedish pawnbroker Svensk Pantbelaning to Preato Capital for £5.8 million (€8.6 million; $11.8 million). Rutland acquired Svensk Pantbelaning for £3 million in September 2004, at the same time as it bought European pawnbroker Harvey & Thompson from Cash America International. Rutland fully realised its investment in H&T through a listing on AIM in May 2006. Rutland received over £50 million from both companies, representing a return of 2.7 times the initial investment. Svensk Pantbelaning has 12 outlets across Sweden.
LION GULPS DOWN RUSSIAN JUICE MAKER
London-based buyout firm Lion Capital has made its first foray into Russia with the acquisition of Nidan Soki, a branded juice maker. Terms were not disclosed, but last November executive director Olga Yeremeyeva said Nidan was considering a public offering that would value the business at between $600 million and $700 million. The company recorded increased sales of about $270 million last year. The Moscow-based business employs around 2,500 people and is the third-largest juice producer in Russia, with an 18 percent market share.
RIVERSIDE MAKES TEN TIMES ROBOTICS RETURN
Lower mid-market firm The Riverside Company has sold oil and gas robotics company Welltec Holdings to US buyout firm Summit Partners for an undisclosed sum. The firm said in a statement it had registered a 183 percent IRR and 9.9 times return on its original investment. Welltec was acquired by Riverside's second European fund, which had recorded an IRR of 52 percent and a net cash-on-cash return of 2.8 times as of June 30. This exit takes the capital returned to investors to 284 percent of their original investment.
BRIDGES BUYS FIRST KEY-WORKER HOUSING BLOCK
Bridges Ventures, the UK firm that invests in some of the country's most deprived areas, has made its first foray into key-worker housing, buying an apartment block for medical staff in Plymouth. Bridges is investing £2.3 million (€3.4 million; $4.7 million) to buy three blocks of studio apartments, which will be used to house nurses and doctors employed by the Plymouth Hospitals NHS Trust. The venture firm has joined forces with Key Homes, a private developer that specialises in affordable and social housing. Key Homes, who brought the opportunity to Bridges, will manage the three apartment blocks.
CARLYLE SELLS NP AEROSPACE
The Carlyle Group has sold NP Aerospace, a UK manufacturer of lightweight composite armour systems, for £71 million (€105 million; $144 million). UK engineering business Morgan Crucible has paid £41 million for a 49 percent stake while the management team has increased its 10 percent stake to 51 percent. Morgan Crucible and the management team are each stumping up £5 million equity while Morgan Crucible is providing another £36 million in debt.