News: Deals – March 2002

Coller Capital makes first exit from Lucent portfolio
Pequot Capital Management and New Venture Partners, the New Jersey-based venture capital operation controlled by UK private equity secondaries specialist Coller Capital, have partially divested wireless communications company Celiant Corporation to Andrew Corporation in a $470m deal.

Coller Capital backed the buyout of Lucent New Ventures Group in December 2001, receiving an 80 per cent stake for an investment believed to be in the region of $100m. Celiant had previously been spun out of Lucent Technologies in June 2001. In October 2001, Pequot Private Equity, a division of Pequot Capital Management, invested $50m in Celiant.

Shortly after completing the original deal in January, Jeremy Coller was very optimistic about the possibilities for Celiant. Speaking to Private Equity International, he commented: ?Celiant is profitable. It’s EBIT positive and growing, and it has a five-year order backlog.?

The total consideration paid by Andrew Corporation is $469.8m, which will be satisfied by a cash payment of $203m and 16m Andrew Corporation shares, valued at just under $267m. On completion of the acquisition, New Venture Partners, the company formed to acquire Lucent New Ventures Group in January, and Pequot Capital Management will between them control 17 per cent of the Celiant shares.

Nomura sells 1,200 pubs
The principal finance group of Nomura International, the Japanese investment bank, has sold 1,200 public houses from its Inn Partnership business to Pubmaster in a £523m transaction. According to reports, the transaction, masterminded by departing chief Guy Hands, is understood to have made the bank a £160m profit. Nomura bought the pubs from Greenalls for £385m in 1998.

US investment bank Salomon Smith Barney helped find a buyer for the business. Had no deal taken place, Nomura would have turned to securitising the estate’s future income stream. It was reported though that Hands was keen to see a sale completed prior to his departure to Terra Firma, his own investment company, currently out fundraising its first fund.

For Pubmaster, the deal marks an important step towards implementing an ongoing acquisition strategy. Last year the group came close to buying Britain’s largest regional brewer, Wolverhampton & Dudley. Pubmaster said it paid £101m for Inn Partnership’s equity and spent £422m on paying off debt and incentives. The group, which is controlled by WestLB, now owns 3,200 pubs in the UK.

Candover finally lands Swissport
UK buyout firm Candover has finally been able to complete the management buyout of Swissport, the airport ground handling business of Swissair Group AG. The deal totalled SFr580m (€393m), with Candover contributing SFr274m (€185m) in equity finance, plus a senior debt component coming from five banks led by RBS and a mezzanine tranche coming from Intermediate Capital Group. Management are also investing.

Marek Gumienny, a managing director at Candover who will be joining the Swissport board, commented that the deal had originally been set to go through in August 2001 and that a price had been agreed then, subject to due diligence. The terrorist attacks of September 11 in the US and then the collapse of Swissair Group into receivership on October 4 then caused the deal to be put on hold. The Zurich courts then became involved as the creditors of Swissair circled its assets and this obliged Candover to wait on the courts’ approval. Although Gumienny would not specify what impact these events had on the exact price of the deal, he confirmed that the final figure paid was significantly lower than the one tabled in August.

Swissport is the second largest ground handling agent in the world and operates in 23 countries at 130 airports, servicing over 550 airlines worldwide. The company currently has 13,000 full time employees. For the year ended 31 December 2001 Swissport had revenues of CHF1.2bn.

The Swissport acquisition is the first investment by the Candover 2001 Fund which had a first closing in June 2001 at €1.1bn and is targeting a final close at €2.5bn.

HSBC backs funeral buyout
HSBC Private Equity was the equity sponsor in the management buyout of Dignity Caring, the UK funeral services company. In a £220m transaction, HSBC acquired a 65 per cent stake in Dignity, with former controlling shareholder Service Corporation International, the self-styled ?global death services? provider, retaining a 20 per cent interest. The management team led by Peter Hindley, chief executive, will hold a 15 per cent stake.

Dignity, which in 2001 had revenues of around £115m, sold at eight times adjusted EBITDA. Service Corporation is understood to have sold the company for less than half of what it paid when it acquired the business in 1994. Service Corporation is currently selling parts of its international holdings in a bid to pay off debt and stabilise its share price. In October 2001, it sold a business in Belgium to Waterland Private Equity Investments, a firm specialising in the senior citizen sector.

The company’s management was advised by KPMG and Eversheds. HSBC Private Equity consulted with lawyers DLA, while the vendor was advised by Linklaters.

Private equity buyer likely for Boosey & Hawkes
Boosey & Hawkes has announced the closing deadline for bids for the musical instruments and publishing company. Three private equity firms, thought to include 3i and Close Brothers, have submitted bids for the company.

Bids were tabled to Deutsche Bank, Boosey & Hawkes’ bankers, prior to the 25 February auction deadline. A number of potential buyers from private equity houses, including Gresham Trust and Graphite Capital, opted not to make a bid for the struggling business as did trade buyers such as Steinway & Sons, the US piano maker.

The company put itself up for auction in October 2001 following a 220p per share indicative offer for Boosey’s publishing and instrument divisions from Graphite Capital and Music Sales, a London-based publishing company.

Boosey made a loss of £14m in the year to 31 December 2000. The company’s share price on Friday 22 February was 181p, valuing the company at £37.2m. The company is estimated to have debts totalling £60m.

Pricoa buys into German residential real estate
Pricoa Property Private Equity (PPPE), the European real estate private equity arm of US-based Prudential Real Estate Investors (PREI), said it has advised Prudential Financial Inc, its parent, on a strategic investment in DeWag WohnAnlage, a Stuttgart-based residential real estate investment and consulting group.

DeWag has a portfolio of approximately 200 housing units in eight different locations across Germany. The firm, set up to benefit from Germany’s growing base of home owners, is to use the funding from Pricoa to acquire additional properties from industrial corporations and institutional investors. Under the terms of the deal, Prudential will take a 70 per cent stake in DeWag in return for an equity investment of circa €20m.

Jonathan Short, chief executive officer of PPPE in London, commented: ?We believe [DeWAG] is well-positioned to meet the growing demands for private home ownership in Germany. German corporations are unbundling their residential homes portfolios, and with interests being where they are, it is very affordable.?

The deal marks PPPE’s third investment in continental Europe. In June 2000, the unit invested $80m in the purchase of Banimmo Real Estate, a Belgian property manager. Prudential Financial Inc., PPPE’s parent, has since sold a 50 per cent stake in Banimmo to Artesia Banking Corporation. In November 2000, PPPE injected $80m of growth capital into Bauwert, a Berlin-based property developer.

PPPE closed European Property Partners, its first European real estate private equity fund in May 2001 at €227m, with external investors investing alongside Prudential Financial. According to Short, the fund is almost fully invested.

Bridgepoint buys and builds with Virgin Active
European private equity investment group Bridgepoint Capital has acquired a 55 per cent stake in Virgin Active, Virgin’s UK health and fitness chain, in a deal valuing the company at £110m. How much equity Bridgepoint invested in the deal has not been disclosed. Bridgepoint made the investment from its European Private Equity Fund II.

Commenting on the deal transaction, Bridgepoint Capital director Rob Moores said: ?We were attracted by Virgin Active’s performance to date and the potential of a brand that is capable of further rollout in the UK, Europe, North America and Asia.? James Murray, director of Bridgepoint, commented that the Virgin brand helped to distinguished the business from its rivals in an expanding market.

Bridgepoint Capital’s investment is the latest in a series of investments in the health and fitness sector. Previous investments include the €17m buyout of Living Well in 1994 and a €48m growth capital investment in Holmes Place in 1996.

Bridgepoint was advised by Travers Smith Braithwaite (legal), KPMG (financial) and Baird (market due diligence). Virgin Group received advice from Harbottle & Lewis (legal), New Boat House (corporate finance).

CapMan buys Swedestart
CapMan, the Finnish buyout and venture investment firm, has agreed to acquire Swedish venture capital manager Swedestart in a €17m transaction. Talks between the two houses began in Spring 2001.

CapMan’s funds will have the opportunity to co-invest in Swedestart’s technology transactions, whilst Swedestart’s technology fund will be invited to participate in relevant CapMan investments. Under the terms of the deal, CapMan will receive between 4 and 20 per cent of carried interest from Swedestart’s fully invested Fund II, 12 per cent from the new SKr750m (€80m) Swedestart Tech fund and 10 per cent from the SKr460m Swedestart Life Science Fund.

Swedestart’s three owners will become senior partners of CapMan and hold 5.9 per cent for the company’s share capital.

Carlyle leads €30m round for Reef
The Carlyle Group has announced details of its investment in Reef, a Belgium-based global provider of e-business software applications. Carlyle Group led the €30m third-round funding through its €730m Carlyle Europe Venture Partners fund. Additional investors included 3i, which led the company’s previous round of funding in October 2001, IDG Ventures Europe, Finafund (Europe) and Viventures. SG Cowen Securities acted as placement agent and also invested in the round.

Palmers & Harvey in £170m buyout
2,400 managers and employees participated in the £170m buyout of Palmer & Harvey McLance Holdings Ltd, taking a stake of almost 25 per cent in the wholesale and distribution business. Close Brothers Corporate Finance advised the buyout team to go for a debt package instead of an external equity provider. In addition to the £170m required to buy the business, £110m of working capital is being made available to the company. £160m of the total funding will be raised from a syndicated asset-backed facility. The financing was arranged by Barclays Bank and Burdale Financial.

EQT Finland backs Larox MBO
EQT Finland, the Finland-focused private equity fund managed by EQT Partners, has reached agreement with the majority shareholders of Larox Corporation to take the company private. EQT and the Vartiainen family, which currently controls 62 per cent of the filters and process equipment manufacturer, have formed Xoral Oy, a 50-50 joint venture, which will make a public tender offer for the Helsinkilisted company. The deal, which values Larox at around €17m, will see the Vartiainen family reduce its holding in Lorax to 50 per cent, with EQT Finalnd acquiring the remaining 50 per cent.

CBPE backs MBI of VIP Heinke
Close Brothers Private Equity (CBPE) has backed the MBI of VIP Heinke, a manufacturer of rubber mouldings and extrusion products used primarily by the water and rail sectors, from Etex Plastics. The financial details of the transaction have not been disclosed. West-Midlands entrepreneur David Grove leads the management team although he will take a non-executive director role with VIP Heinke.

DB Capital commits $15m to PowerDsine
PowerDsine, an Israel-based developer of software-controlled network power solutions, has completed a $30m round of venture financing arranged by Robertson Stephens International and led by DB Capital Venture Partners, the venture capital arm of Deutsche Bank. DB Capital Venture Partners invested $15m from the DB Capital Ventures Europe fund; other investors include Dain Rauscher Wessels Partners, Robertson Stephens Partners and several existing shareholders. The company is developing technology that enables the safe delivery of operating power, together with voice and data, on standard LAN cables.

Highwave Optical secures €32m package
A consortium of private equity firms has invested €32m in Highwave Optical Technologies, a company developing optical telecommunications networks listed on the Nouveau Marché in Paris. Follow on investors in the round include US venture capitalists Newbury Ventures and Technoventures with commitments of €11m each. New investor DB Capital Venture Partners came in with €9.95m. Newbury has participated in all of Highwave’s financing rounds, from the seed round in April 1998, up to the preinitial public offering round in early 2000.

Barclays PE in Italian chemicals MBO
Barclays Private Equity (BPE), the buyout arm of Barclays Capital, has backed a €16m management buyout of the Carlo Erba Reagenti chemicals unit from Italian business Antibioticos, part of the Montedison Group. The Italian conglomerate has said the sale of the business, which has €5m in debt, is part of its strategy to focus on core energy activities and reduce its debt pile. The business manufactures reagents and labware equipment. In 2002 the company had a turnover of around €40m.

European VCs back Spanish software buyout
Italian venture capitalists 21 Invest and B&S Private Equity Group, and UK firm Sagitta Private Equity, have backed the management buyout of Spanish software house Logic Control for an undisclosed sum. 21 Invest and B&S Private Equity Group will each take a 46.2 per cent stake, with Sagitta Private Equity also holding a stake. For 2001 the company recorded €40m in sales and €7.3m EBITDA.

EAC invests in dental chain
European Acquisition Capital (EAC), the pan-European venture capital company, has invested in ADP Dental Company, one of the UK’s largest dental chains. This is the second investment from EAC’s third fund after last year’s acquisition of 5 à Sec, the world’s largest chain of dry cleaners. EAC will have a majority equity stake in ADP with additional equity being provided by senior management. Jonathan Heathcote and Bill Robinson of EAC will join Richard Flaye on the ADP Board.

Microscience wins £25.5m in third round
Microscience, the biotechnology company specialising in the discovery and development of innovative vaccines, has announced the completion of a successful £25.5m (€42m) third-round fund raising. Advent Venture Partners and JP Morgan Partners led the financing round together with existing investors, Apax Partners and Merlin Biosciences. The funding is expected to see Microscience through to flotation, expected to take place within the next two years. Talking to Reuters, Rod Richards said: ?We can now come to the market when we want to, rather than when we have to.?

Brian Mercer joins Candover
Candover Investments has announced the appointment of Brian Mercer from TMT investment bank Broadview International. Mercer will join the board of Candover Partners Limited and will primarily focus on buyouts in the technology services sector. In his 12 years at Broadview, Mercer co-founded its European operations and was responsible for developing the firm’s activities throughout Europe. Mercer’s appointment takes the number of buyout executives at Candover to 18.

Gilde IT Fund appoints director
Gilde IT Fund, has announced that Lars Lindell is joining the firm as a director and partner. Prior to joining Gilde IT, Lindell was a vice-president at Salomon Smith Barney, responsible for research coverage of the telecommunications equipment sector. More recently he was with nCoTec Ventures, a pan-European telecom technology venture capital firm, where he was a director.

PAI builds presence in Italy
Paribas Affaires Industrielles (PAI), the private equity arm of BNP Paribas, has appointed Raffaele Vitale head of its operations in Italy. Vitale is leaving Lazard where he was a managing director based in Milan, to join PAI. He was one of the founders of investment bank boutique Vitale & Borghesi that was acquired by Lazard in 1998. Eric Delorme, a partner at PAI in Paris said that the appointment was a logical step as Italy was a key market for PAI.

KKR brings in more resource
Kohlberg Kravis Roberts (KKR) has appointed Dr Axel Eckhardt to head Capstone Europe, a London-based management consultancy that is solely retained by the firm. Reinhard Gorenflos joins also KKR as a director in London. Capstone Europe advises KKR on strategy for its existing portfolio companies as well as new deals primarily in Germany.