Kind Of A Big Week

Instead of focusing on one deal, I’ve briefly covered a handful of the week’s most interesting transactions. After the gushing font of deal activity this week, it was hard to pick just one.

The Flip-Floppers: Advent International

Advent told me in June that it wouldn’t merge its new portfolio company, Hudson Group (you know, the airport retailer), with Dufry, its Europe-based duty-free retailer. Curious, since I thought it made perfect sense, geographically, and product-wise. But Advent didn’t want to complicate things since part of Dufry is listed on a Swiss exchange. They told me the companies would form a “partnership” and benefit from “best practices” but exchange no ownership. Well, yesterday they merged.

The Hudson merger will dilute some of Advent’s shares in Dufry. Nevertheless, the combined group has around $2.3 billion in revenues and is without a doubt a global airline powerhouse. Even with decreases in the number of people flying, the company stands to benefit from stringent airport security and exclusivity agreements within terminals.

The Cross-Border Challenge: Warburg Pincus

Warburg could make $112.5 million on a 7%, two-year investment in Huiyuan Juice Group, the Hong Kong company that just got a takeover offer from Coke. If the Chinese government allow an American company to buy 100% of one of its brand-name businesses, it could certainly become an interesting place for buy & builds for US private equity firms. At $2.5 billion, Huiyuan would be the largest foreign buyout to date in China. The reports of message boards exploding in anger over foreign acquirers of Chinese brands remind me a bit of the Anheuser/Imbev deal. (If the deal goes through, Chinese consumers can probably expect to see a barrage of patriotic ads from the target, as we’ve seen with Budweiser/Bud Light.)

The Redeemer: Harvest Partners

Less than a year ago, Harvest Partners were lucky to unload a troubled auto parts manufacturer, Lund International, to Linsalata Capital Partners and Resilience Capital. The company’s revenues had plunged under Harvest’s 10-year ownership thanks in part to neglected R&D. But yesterday the firm proved it had a forward looking cutting edge in the auto sector. It scored a 3X return on the exit of its green bus manufacturing company, New Flyer Holdings. The timeline:

  • 2004-Harvest buys of New Flyer
  • 2005-New Flyer IPOs on Toronto Stock Exchange
  • 2007-2008: Harvest exits remains holdings over 3 transactions.

It’s a relatively short ownership period with an attractive growth profile (fueled by alternative fuels). When New Flyer went public in 2005, it had around C$70 million TTM Ebitda; in June it had grown to C$130.

The Repeat Offender: Gryphon Investors

In May, Gryphon Investors announced three acquisitions in two days.  Today they announced two more in one day. Exciting times. But more interesting than that is the way the firm’s been doing its deals. For all three deals in May, and the deals today, Gryphon has tapped the lending arms of its LPs to finance its transactions. This time around was slightly different, with Gryphon syndicating the finance on its own with 4-5 lenders, one of which was a Gryphon LP.

They bought one company, clinical research services firm Synteract, from Celerity (not Celebrity) Partners, which will continue on as a minority investor. This is another interesting development, in my book. What private equity firm keeps a stake in a secondary buyout? I’ve heard of seller financing (which American Capital is keen on), but a passive chunk of mezzanine debt is very different than a slice of equity. It’s a question I ask every time I see a club deal, or a Blackstone + Tom Hicks SPAC. Who is steering this ship?

Honorable mention: Trinity Hunt Partners

The firm, as Dan pointed out yesterday, had the foresight to try to make money on the sure-to-burst housing bubble two years ago. Yesterday it cashed in, selling National Default Exchange for $208 million (it invested around $25 million in 2006).