Sovereign exits waste management deal

Three years after first investing in Churngold Holdings, UK mid-market investor Sovereign Capital has sold the waste management and recycling group to a trade buyer for £22.5m.

UK middle market private equity firm Sovereign Capital has sold waste management and recycling business Churngold Holdings to Viridor Waste Management, a subsidiary of Pennon Group, for £22.5m.

Sovereign Capital originally backed the £5.6m management buy-in of Churngold in 1996 and provided a further £2m of development funding three years later to support its buy and build strategy. Churngold is now ranked as the third largest independent regional waste and environment business in the UK.

Sovereign Capital will maintain its interest in the remediation business of Churngold, focusing on the regeneration of contaminated land.

“When we invested in Churngold, we recognised the platform potential and strong cashflow which has enabled the development of a highly successful regional waste management and recycling business,” Andrew Hayden, a director of Sovereign Capital, said in a statement.

“We are delighted to have achieved a very successful exit in what is clearly a difficult M&A market,” Hayden said in the statement. “This reflects the quality of the business that has been developed over the last six years. This is a perfect example of Sovereign Capital's focus on developing and growing businesses rather than simply using financial instruments to generate returns.”

Sovereign closed its third fund on £120m in May last year. The firm was founded in 1988 and typically invests in mid-market U.K. companies requiring £2m to £15m in equity. Portfolio companies include pub company Mortal Man Inns, veterinary services company CVS Ltd., and utilities industry facilities management services company Promanex Group.

This is the fourth realisation from Sovereign Capital's second fund SCLP II.  The IRR from the four completed realisations in SCLP II is 32 per cent gross and the multiple of money is three times cost.

In February, Sovereign acquired Honormead Schools, a group of residential schools for children with special educational needs, in a £22m buyout. In January, the firm backed the £5.7m management buyout of Telfordbased Complete Personal Assistance, a healthcare business launched eight years ago to provide care services to enable badly disabled people to return to their own homes from hospital, from 3i.