Bridgepoint picks up CEE rail company, recaps car business

European buyout firm Bridgepoint has made its first standalone acquisition in central and eastern Europe after opening an office in the region six months ago. At the same time it has managed to recapitalise a Finnish business despite debt market travails.

Bridgepoint, the European mid-market buyout firm, has bought eastern Europe rail logisitics and operating company CTL Logistics from its founder Jaroslaw Pawluk for an undisclosed sum.

The company works in rail transportation, freight forwarding, siding management and waste disposal and its specialist areas include coal, coke, chemicals and steel.

Bridgepoint’s spokesman said: “This is the first standalone deal in the region although we have made investments for other portfolio companies.”

The company had revenues of PLN1.1 billion ($441 million; €298 million) in 2006. Bridgepoint estimates annual growth rates in volume and value in the rail freight industry of 4 percent and 5 percent per annum respectively for the next five years.

Bridgepoint’s spokesman said the firm will look to benefit from the growing rail freight market from eastern to western Europe as more goods continue to be produced in the eastern states for consumption across the whole of Europe.

Regional firm Mid Europa Partners sold Estonian Railways in February this year to the Republic of Estonia for €150 million. Mid Europa made a 2.4 times return and an internal rate of return of 35 percent after buying the company in 2001 for €64 million.

Bridgepoint opened its regional office in Poland in March 2007. Bridgepoint’s spokesman said: “Poland is the largest buyout market in the region and it is the base for our activities across central and eastern Europe.”

The investment comes from Bridgepoint’s third European fund which closed on £2.5 billion in May 2005. This fund is now almost 80 percent invested, Bridgepoint’s spokesman said. The firm has been raising a €4 billion fourth fund since September.

Separately Bridgepoint has recapitalised A-Katsastus Group, a Finnish vehicle inspection business it acquired in January 2006, with a debt facility totaling €290 million.

Regional banks Nordea and SEB, co-lead arrangers and bookrunners, closed the book on a €225 million tranche of senior debt and a €10 million revolving credit facility oversubscribed. In addition there is a €20 million second lien tranche and a €35 million mezzanine facility.

A source familiar with the deal said the facility was conservative at a multiple of seven times yearly earnings. Bridgepoint declined to comment on the leverage, but a spokesman said: “[The refinancing] is down to a combination of solid earnings and profit growth and the company's strong position in a market that is growing on the back of increased consumer, environmental and regulatory pressures for additional testing requirements.”

The debt, which is due to complete syndication in the next two weeks, will be used to pay back shareholder loan notes and to fund further expansion through acquisition. In July 2007 the company acquired a Belgian rival, Autoveiligheid. This was A-Katsastus’s sixth add-on acquisition under Bridgepoint.

Sir David Walker yesterday singled out Bridgepoint’s latest six month report on its website as the model of what is required in his reporting guidelines.