Europe – June 2003

Europe
Deals & Exit
BC Partners pips rivals for cable deal
Deutsche Bank and BC Partners have reached agreement over the acquisition of TeleColumbus Group by funds advised by BC Partners for a total consideration of €510m. BC Partners will acquire the group in association with its management team. HypoVereinsbank, ABN AMRO and Royal Bank of Scotland will provide the debt facilities. The transaction is subject to approval by the German cartel office.

BC Partners was one of three private equity groups, including a consortium of Apax Partners, Providence Equity and Goldman Sachs Capital Partners, and US firm Apollo, which submitted offers for the business. At the time of the bidding process, the cable group was valued at between €450m to €500m.

TeleColumbus Group is among the leading cable providers in Germany with 2.3m cable customers and revenues of circa €235m in 2002. “We like the stable and defensive nature of the business model of TeleColumbus, as well as its leading competitive position,” said Raymond Svider, senior partner at BC Partners who led the transaction team.

Triton syndicates Tetra stake to Axa
Less than six months after the original deal to acquire Pfizer’s aquarium and pond supply business Tetra, German and Northern European buyout fund Triton has sold a 22 per cent stake in the company to Axa Private Equity. The terms of the deal have not been disclosed, although Triton paid Pfizer just under $240m for the business in November. Royal Bank of Scotland completed the financing of the transaction with senior and mezzanine debt facilities.

Tetra manufactures a range of products, including food for ornamental aquarium and pond fish, and fishkeeping equipment and accessories and is the market leader by both share and revenues. The company reported worldwide revenues in 2001 of $181m.

Advent buys in Turkey
International private equity group Advent International has acquired leading Turkish bakery chain Unmas with local partner Turkven from the major Turkish conglomerate Dogus Holding. The two private equity firms backed the buyout using an offshore subsisdiary vehicle, DAT Bakery International Holding. Terms of the transaction have not been revealed.

Unmas is the main producer of packaged bread in Turkey, whose products trade under the brand name UNO. The company is being spun off by Dogus Holding, one of Turkey’s largest business groups which is withdrawing from the food sector. Gelu Tudose, a Principal with Advent International’s Central European team said: “We believe that the current staff of UNO together with new management will build on the strengths of the brand to increase coverage, penetration and profitability.”

Veronis Suhler, 3i acquire Verizon units
New York-based media merchant bank Veronis Suhler Stevenson and UK private equity firm 3i Group are to purchase six European directory operations from Verizon Communications for an undisclosed amount. CIBC World Markets is the sole underwriter of the senior and mezzanine financing placed in conjunction with the transaction, the terms of which were also not disclosed.

The investment continues the strategic relationship between VSS and 3i in the European directory sector, in which the two firms have partnered to jointly invest in leading European directory publishers. With the close of this transaction, VSS and 3i will have co-investments in eight European companies, totalling 313 directories with a combined circulation of 31.7m.

“This is a landmark deal which is a further example of 3i’s commitment to the media sector. Investing alongside VSS, one of the leading media investors, demonstrates our knowledge and ability to execute another media directories deal,” Chris Graham, director of 3i’s media team, said in a statement. “We know the industry well, and having looked at a variety of opportunities, we believe this business to be one of the fastest growing in the marketplace.”

Axa PE takes Souriau majority stake
Axa Private Equity has agreed terms with FCI Group over the acquisition of an 85 per cent stake in its specialised connectors business Souriau. France-based Souriau manufactures connectors for industrial, aeronautics, space and defence applications. It employs 1,250 people and reported sales last year of €153m in 2002. The group has production plants in France, the United States, Japan, the Dominican Republic, Morocco and India. Financial terms for the transaction have not been disclosed.

Electra snaps up three Rexel units
Mid-market private equity firm Electra Partners, currently investing a €1bn European buyout fund, has made further inroads in the continental European buyout market with the €112m acquisition of the security business of Rexel, an electrical parts and supplies maker owned by French group Pinault-Printemps-Redoute (PPR).

The deal is the first transaction to originate from Electra’s Paris office, which is headed by Jean Ducroux. Electra plans to grow the business through “carefully targeted” acquisitions, as well as expanding the company’s product lines. Ducroux said in a statement: “The business has a market leading position in an expanding market and is perfectly poised to lead industry consolidation.”

Enterprise takes fashion retail stake
Enterprise Investors, Central Europe’s largest private equity firm, has taken a 13 per cent stake in LPP, the Polish fashion retailer which listed on the Warsaw Stock Exchange in May 2001. Enterprise has paid $13.6m for the 13 per cent interest, acquired through an equity increase in the business as well as the acquisition of shares from British investment fund Grangefont. LPP designs and sells clothing through a retail network of 54 stores in Warsaw, Moscow, Budapest, Prague and other major cities in the CEE region.

ABN Amro buys UK specialist clothing unit
European private equity firm ABN Amro Capital has continued its busy year for buyouts, acquiring Frank Thomas Holdings (FTH) from Barclays Private Equity in a transaction which values the business at £38m (€53m). ABN Amro has invested £13.3m in the deal, which will see Andrew Moye and Paul Moxon take non-executive positions on the company’s board. Barclays Leveraged Finance provided £18m of senior and mezzanine debt and £3m of working capital facilities. Management, led by Peter Laughton, have reinvested £3.7m.

Permira confirms £1.5bn Debenhams move
UK retailers remain high on the agenda of European private equity firms. Department store chain Debenhams looks set to become the latest listed company to succumb to a private offer after Permira confirmed the details of a 425 pence per share offer.

Debenhams became aware of Permira’s interest in the business in February. The offer values the business at £1.54bn. Debenhams confirmed in a statement that the board of directors has agreed that directors may work with Permira on this indicative proposal.

BertelsmannSpringer goes to Cinven, Candover
Cinven and Candover have beaten off competition from two rival private equity consortia to acquire publishing unit BertelsmannSpringer in a deal valuing the business at €1.05bn. Senior, mezzanine and working capital facilities have been arranged and underwritten by Barclays Capital.

Bertelsmann, which has been in talks with private equity groups from the US and Europe since the end of 2002, selected the joint offer from the two UK firms ahead of a club comprising CVC Capital Partners and US investor The Blackstone Group as well as UK-based academic publisher Taylor & Francis Group, which teamed up with Apax Partners.

“BertelsmannSpringer has been a highly sought after asset,” said Simon Leefe, a director at Candover. “It is a very attractive international business, with a strong reputation in European publishing.”

Boston, LGV buy Warner Village
Legal & General Ventures (LGV) and US-based Boston Ventures have continued the ongoing consolidation of the UK’s cinema market with the acquisition of the UK operations of the Warner Village Cinema Group.

The two firms have agreed to pay around £225m for the business, which will be merged with SBC International Cinemas, the small UK chain which was acquired by Boston Ventures in 1998. The purchase of 36 Warner Village sites nationwide boosts its number of multiplex cinemas from six to 42 with a total of 384 screens. The expanded company, which will be renamed Vue, becomes the second biggest cinema operator in the UK.

Boston Ventures is providing significant additional funding for the transaction and is joined as equal partners by Legal & General Ventures and US-based Clarity Partners, which specialises in communications, media and related technology investments. CIBC World Markets provided the debt financing for the acquisition. Barry Baker, Barbara Ginader and Vikrant Raina of Boston Ventures will join the new company’s board.

Europe
Funds & Buyside
PEH in large secondary sale
Private Equity Holding, the Swiss private equity portfolio managed by Swiss Life Private Equity Partners, has offloaded around two thirds of its remaining investment portfolio.

The firm said it has sold a portfolio of private equity fund investments with a total fair value as of March 31 2003 of SFr616m (€407m) and outstanding commitments amounting to SFr305m (€201m). PEH values its remaining portfolio at SFr268m, and outstanding commitments to private equity funds at SFr59m. The buyer is CSFB Private Equity, although the specific identity of the fund behind the investment has not been disclosed. The firm’s activities in the secondaries market are led by DLJ Strategic Partners, the group’s secondary fund run by Stephen Can, which has $832m in committed capital. Swiss Life has assisted CSFB with a SFr150m loan to back the transaction.

In line with the majority of transactions in the secondaries market, the financial terms of the deal have not been disclosed. However, a source close to PEH said that CSFB has agreed has secured sufficient proceeds from the sale to repay in full an outstanding SFr325m loan to Swiss Life.

PEH said in a statement that the transaction had “secured [the firm’s] financing”. “The company is debt free and has regained the necessary managerial flexibility to actively shape its future.” In early May, the firm sold its interest in a US venture capital partnership to an unnamed buyer.

UK pension funds snub private equity
Figures published by the British Venture Capital Association (BVCA) have revealed a dip in commitments by pension funds to UK private equity. UK funds raised a total of £7.8bn last year, down 43 per cent on the high water mark of 2001, when £13.6bn was raised. Of the 2002 total, UK pension funds channelled just £796m into private equity – down from £1.6bn the previous year.

UK banks committed £1bn to the asset class in 2002, representing 14 per cent of all funds raised, compared with 2001, when their investment represented five per cent of the overall total. UK insurance companies also increased their allocation to the industry, investing £739m in 2002, up 64 per cent on the previous year. A total of £361m was returned to investors, equating to just under five per cent of the overall total of funds raised.

According to the BVCA, UK private equity outperformed UK pension funds and all FTSE indices over one, three, five and ten year periods. In 2002, UK private equity achieved a net return of 1.4 per cent, against minus 13.9 per cent for UK pension funds and minus 22.7 per cent for the FTSE All-Share index.

“Despite the challenging trading conditions of the last twelve months, the private equity industry has remained robust and continues to outperform all other comparable asset classes,” said John Mackie, chief executive of the BVCA. “The industry has delivered superior returns on investments and continues to make a crucial contribution to the UK economy.”

Schroders launches second FoF
Schroders plc, the UKlisted asset management group, has unveiled plans for the successor to last year’s Schroder Private Equity Fund of Funds which raised €242m for investment in US and European funds. The group is hoping to raise €250m for Schroder Private Equity Fund of Funds II (SPEFOF II), which will follow the previous fund’s remit of focusing on top tier European and US private equity managers, with a further ten per cent set aside for investment outside these markets.

SPEFOF II will offer investors the choice of three separate share classes with differential pricing. The minimum investment is €125,000. Andrew Sykes, head of alternative investments at Schroders, described SPEFOF II as “a highly flexible private equity fund of funds product, which is designed to meet growing demand from a wide range of investors.” A pre-commitment facility of up to €100m has been set up by the Schroder Group.

Charterhouse may settle for €2.5bn
Charterhouse Development Capital, the UK-based private equity firm, may fall short of the €3bn target set for Charterhouse Capital Partners VII, its latest buyout fund. Speaking to Bloomberg, Charterhouse director Tom Plant said the company would settle for a final close of €2.5bn, expected at the end of July. Charterhouse held a first close of CCP VII last August on €1.4bn, followed by a second close at the turn of the year at €2bn. The private equity fund placement group at Citigroup and Wise Capital are acting for Charterhouse as placement agents in the current fundraising effort.

BML launches university fund
BioScience Managers Ltd (BML), the UK-based bioscience fund manager, has announced a joint initiative with Imperial College London to raise a fund aimed at backing early-stage medical and life science companies emerging from the university.

The BML Ventures Imperial Fund, which has a target size of £50m, will make investments in 12 to 15 start-up and early-stage companies in the healthcare sector. In a statement, BML said it would aim to close the ‘development gap’ which currently leaves newly formed science, technology and healthcare companies struggling to raise funds between £0.5m and £5m.

The fund will have exclusive access to opportunities emerging from Imperial College’s medical and life sciences sectors – approximately 50 per cent of its funds will be invested in young companies built upon Imperial College science. The remainder will be invested in similar opportunities predominantly in the UK.

Englefield tops up debut fund
Englefield Capital, the private equity firm set up by former Warburg Pincus professional Dominic Shorthouse and backed by Bregal the Swiss-based office managing the wealth of the Brenninkmeijer family, has held a final close of its debut fund, The Englefield Fund, on €700m.

The fund held a first close on €660m in January, largely thanks to a €495m commitment from Bregal. Additional institutional investors include AXA Private Equity, the Dutch Shell Pension Fund and Delta Lloyd.

“Our strategy is to stay small, and to focus on attractive sectors where we have identified strong management teams that will benefit from favourable fundamental trends in the sector in which they operate,” said Shorthouse. Separately, the firm has established an advisory board that will review the sectors the partners have identified as attractive. The board includes Louis Brenninkmeijer and Yves de Balmann of Bregal, includes broadcaster Sir David Frost, former Warburg Pincus senior partner Ed McKinley and former Gartmore Investment Management chairman Paul Myners.

MB Funds closes fund III on E117m
Finnish private equity firm MB Funds has held a final close on €117m for its third fund, MB Equity Fund III. The fund, which was launched in early 2002, attracted 19 Finnish institutional investors, the majority of which were public and corporate pension schemes and insurance companies. Most of the committed capital came from institutions, which had contributed to earlier MB funds, but the firm was also able to widen its investor base.

Two investments have already been made from Fund III: a buy-and-build transaction involving Inspecta and SFSSertifionti and the privatisation of the Finnish vehicle inspection company.

Lion Capital to raise $100m fund
Lion Capital Advisers, an independent corporate finance and investment management company, has launched Lion Capital Partners 2, a $100m fund that will invest in earlystage companies with a bias towards medical devices and technologies.

In addition to its medical focus, the fund will also seek out opportunities in software, leisure and property. The minimum subscription for the fund, which will be listed on the Bermuda Stock Exchange, will be $250,000.

According to Lion director Paul Loach, around 70 per cent of the fund will be invested in UK opportunities, with the remainder set aside for European opportunities. The average investment size will be between $5m and $10m. “We plan to target companies that have gone beyond the first stage of investment, but that are still early on in the process.”

IPE launches €300m buyout fund
Investors in Private Equity, the French mid-market buyout firm set up by Philippe Nguyen, has launched its debut fund, a €300m private equity fund targeting the French mid-market.

“We are aiming to buy companies in the €100m to €1bn price range,” said Nguyen, the former CEO of both CDC Equity Capital and Credit Lyonnais Private Equity. “It’s a very good period for dealflow at the moment, especially in France. The cycle is very good for private equity.”

In early May, the firm completed its first deal, the acquisition of a 50.4 per cent stake in ERMEWA Group, Europe’s second largest specialist railcar rental group. SNCF Participations retains a minority participation of 49.6 per cent stake.

IPE’s investment team currently consists of seven professionals, with offices in Paris and Geneva. Global Private Equity is assisting the firm’s fundraising process.

Quester adds assets to VCT 5
UK-based independent venture capital investor Quester has raised £4m of new equity capital for Quester VCT 5, the firm’s fifth venture capital which was re-opened to new commitments after holding an original close last May on £18.6m.

Last October, the firm’s director John Spooner announced plans to re-open the fund, the result of an improvement in valuations in the technology sector. ‘The quality of investment opportunities remains high. It seemed obvious to us that reopening Quester VCT 5 would give private investors the opportunity to take advantage of this unique environment.’ The fund has now secured commitments totaling more than £22m.

Europe
People
Crescendo hires portfolio partner
US venture capital firm Crescendo Ventures has hired Wayne Cantwell, former chief executive of semiconductor business InSilicon, as a partner. Cantwell will work with the firm’s portfolio companies in Europe and the US, and is already working with several semiconductor companies in Europe.

In addition to his experience in the semiconductor intellectual property market, Cantwell has also been involved in a number of emerging growth companies including Voyageur Technologies, Qpackets and Zeus Technologies. He currently sits on the board of two early-stage technology companies and provides advisory services to a number of businesses in Europe and the US.

Finland’s MB Funds hires sixth partner
MB Funds, the Finnish private equity firm which became fully independent from Sampo last year, has hired its sixth partner as it seeks to step up its activity in the Nordic buyout market. The firm has hired Eero Niiva, who has fifteen years of investment banking experience including eight years in the corporate finance unit at Carnegie in Helsinki. Managing partner Juhani Suomela said Niiva’s role would centre around initiating and executing buyout deals in the Nordic region.

KKR hires former Carlyle MD
New York-based private equity firm Kohlberg Kravis Roberts has announced the appointment of Jacques Garaïalde as managing director of the firm’s London-based European operations.

Prior to Carlyle, Garaïalde had been a senior partner at the Boston Consulting Group from 1982 to 2000, where he was senior vice president and managing partner of the firm’s operations in France and Belgium from 1992 to 1995 and vice president in charge of Boston Consulting Group’s high tech practice in Southern Europe from 1989 to 1992. During his 18 years as a management consultant, Garaïalde led projects in the communications services, telecommunications equipment, semiconductors, components, defence systems and consumer electronics sectors.

Standard Life appoints US MD
UK-based private equity firm Standard Life Investments (Private Equity) has named Dan Cahill as managing director for North America, continuing its expansion into the US market. Cahill will be based in Standard Life’s Boston office, which opened in April 2002.

Cahill joins the firm from Wilton Asset Management, the fund-of-funds division of State Street Global Advisers, where he was a principal institutional asset manager. Prior to joining Wilton, he was a vice president at GE Capital’s corporate finance group. At Standard Life, he will be responsible for investing $200m of Standard Life’s funds in the US market.

“The appointment of Dan Cahill represents a significant step in our plans to develop and promote our global private equity business,” Jonny Maxwell, chief executive officer of Standard Life Investments (Private Equity). “His knowledge of the industry in North America will make him a valuable addition to the private equity team.”

SG builds leveraged team with three hires
SG, the corporate and investment banking arm of the Société Générale Group, continues to build its European leveraged finance franchise in Europe with three appointments. It has appointed former Scotiabank Europe associate director Nick Corrigan as vice president at its London offices. He will report to René de Laigue, global head of leveraged and acquisition finance, also based in London.

Carole Burlot will join the firm’s French team, also as vice president, where she will report to Patrick Sandray, head of leveraged finance for France. Burlot was most recently an associate banker within SG’s European and Asian Corporate Group in New York.

In Frankfurt, Marco Schunder is joining the team as an associate. He will report to Claus Peter, Head of Leveraged Finance for Germany. Before joining SG, Schunder worked at ING BHF Bank for three years in credit risk management for specialised finance, with a particular emphasis on leveraged finance transactions.

TVM names new senior advisor
Techno Venture Management, the German-US venture capital firm, has recruited Peter Ho-Fischer to the position of senior advisor for the firm’s life science team. In his most recent position as managing director of Robertson Stephens’ European investment banking operations, Hoffmann-Fischer oversaw the establishment of the firm’s first technology and healthcare practice in continental Europe. He was involved in numerous cross-border M&A transactions as well as public and private offerings for some of Europe’s first biotech companies raising in excess of $1bn.

IK builds French buyout team
Swedish private equity firm Industri Kapital has hired former ABN Amro Capital associate director Dan Soudry for the firm’s French operations. The appointment builds the team headed up by Christopher Masek (responsible for the French and Southern European markets), which also includes Jean-Baptiste Wautier, Stefano Sirolli, Rémi Buttiaux and Josep Turró Bassols.

Industri Kapital’s current portfolio encompasses 25 companies with a total turnover exceeding €11bn. The firm’s French investments include Laho Equipement, France’s second largest construction equipment rental group, Fives-Lille, an international industrial engineering group and European luxury foods group Labeyrie.