3i has sold Hilite to AVIC Electromechanical Systems Co., a subsidiary of Chinese industrial conglomerate AVIC, for approximately 473 million euros. Morgan Stanley Bank AG provided financial advice on the transaction. Headquartered in Marktheidenfeld, Germany, Hilite is a provider of automotive system solutions.
3i Group plc (“3i”), and funds managed by 3i, today announced the sale of Hilite International (“Hilite” or “Company”), a leading global supplier of highly engineered automotive engine and transmission components, to AVIC Electromechanical Systems Co., Ltd. (“AVICEM”), a subsidiary of Aviation Industry Corporation of China (“AVIC”), one of the largest industrial conglomerates in China. The enterprise value of the transaction is approximately €473 million (£384 million).
In sterling terms, the total proceeds to 3i Group and funds represent a 2.1x money multiple on the original investment of €190 million (£172 million). Proceeds to 3i Group from today’s transaction will be £155 million, representing a 32% uplift against a value of £117m at 31 December 2013 and a 17% uplift against a value of £133 million at 31 March 2014.
3i invested in Hilite in 2011 in an all-equity transaction to help the Company further exploit its prospects in the fast-growing powertrain segment of the automotive industry. The Company’s products improve fuel consumption, reduce emissions and enhance performance, thereby directly capitalising on these automotive megatrends which are driven by stricter legislation being enacted by governments globally.
Hilite has transformed significantly during 3i’s ownership. The Company refocused its strategy on its core business of highly-engineered products, invested over €100 million in R&D and capital expenditure, and leveraged 3i’s global network to accelerate its expansion into China, the fastest growing automotive market in the world. While Hilite had very limited exposure to the Chinese market in 2011, China is expected to contribute more than 15% to total sales in 2014.
This strategic realignment led to substantial growth of the Company that outperformed the global automotive industry between 2010 and 2013, growing at a rate of 15% CAGR compared to the industry’s average growth rate of approximately 4.5%.
Today, Hilite holds leading positions in its focus segments and is well positioned for continued above-industry growth and profitability driven by products with increasing vehicle penetration and content per vehicle, combined with strong design and engineering expertise and world-class manufacturing capabilities.
Ulf von Haacke, 3i Managing Director, commented: “We identified Hilite’s potential long before we invested in the Company in 2011 as it offered highly differentiated technology in the industry’s fastest growing subsector: Components for fuel efficiency and emissions reduction. Over the last three years, we have supported the management of Hilite in refocusing the Company, fostering its technological leadership and expanding its geographic reach through 3i’s international network to drive sustainable, above-market and profitable growth. We are proud to have been part of the Company’s transformation and today are equally proud to have found in AVICEM a new, long-term owner for the Company who will continue to support Hilite’s successful strategy.”
Karl Hammer, CEO of Hilite International commented: “3i has supported us through a vital phase in our development. We are now a more focused Company with global presence, particularly in the important China market. In AVICEM we have an ideal new shareholder who will help us capitalise on our strengths and position in China and other markets around the globe.”
The transaction is subject to customary formal approval by the relevant competition authorities.
About 3i Group
3i is a leading international investment manager focused on mid-market Private Equity, Infrastructure and Debt Management across Europe, North America and Asia. For further information, please visit: www.3i.com
About Hilite International
Hilite International is a global supplier of leading automotive system solutions. Its innovative and well-engineered engine, transmission and emission control products are used to improve fuel efficiency and reduce emissions for passenger cars and commercial vehicles.
Headquartered in Marktheidenfeld, Germany, Hilite has around 1,370 employees at eight locations in Europe, North America and Asia and generated revenues of around € 389 million in 2013. Around the globe, Hilite is a reliable and close partner to its customers which include the leading international car and truck manufacturers. Its product segments are Variable Valve Timing (VVT) and Double Clutch Transmissions.
Morgan Stanley Bank AG served as exclusive financial advisor and Willkie Farr & Gallagher LLP served as legal counsel to 3i.
This transaction involved an investment recommendation of 3i Investments plc, advised by 3i Germany.