Candover Revisits Fairey For Hydraulics MBO

Fairey Group in January sold its defence and aerospace engineering business, Fairey Hydraulics (FHL), to Candover and management in a GBP55 million (ecu 83 million) buyout, the first deal for the GBP850 million Candover 1997 Fund (story, page 3).

The connection between Candover and Fairey dates back to 1986, when Candover led the group’s GBP51 million buyout from Pearson, floating the business two years later. Fairey has subsequently diversified, adding electronics operations to its specialist engineering products business.

Candover was therefore already familiar with FHL although, as director Martin Calderbank pointed out, the business has developed considerably since the late 1980s, when FHL concentrated principally on systems for military combat aircraft. Such systems are still core to the business, and the company is working on a wide range or projects for the Eurofighter programme, but FHL is now also selling increasing numbers of systems for guided weapons actuation, subsea actuation and railway points. Its main customers are major prime contractors such as British Aerospace, GEC Marconi and GKN Westland; Candover stated that FHL’s order book at the time of the buyout was strong.

Candover provided GBP26 million of equity finance and has taken an undisclosed majority stake. Chief executive Simon Frost, who has been with FHL since 1989, leads the buyout team, supported by other incumbent FHL directors.

Bank of Scotland provided senior debt facilities. Martin Calderbank described the debt package as “standard”, explaining that FHL is not a suitable candidate for a high degree of gearing: “FHL needs stability security and flexibility to undertake long-term projects, since its future is largely dependent on current R&D programmes”.

Ongoing R&D to maintain FHL’s leading position in its specialist market sectors will be key to the future development of the business, but Martin Calderbank said its new owners “would not rule out further acquisitions as the defence industry consolidates”.

Simon Frost commented; “The buyout leaves us in an excellent financial position with the launch of a number of new products backed by our continuing R&D programme planned”. Martin added that Candover “is throwing down a challenge for FHL to become as successful as Fairey Group”.