UK private equity house LDC continues to defy the UK’s otherwise stalled buyout market, leading the £72m merger of its portfolio company Pro-Bel with Snell & Wilcox, a company owned by private equity firm Advent Venture Partners. Both companies operate in the broadcasting technology space.
The deal sees LDC roll-over its investment in Pro-Bel and provide new equity to take a stake just shy of 60% in the combined company. Meanwhile Advent Venture Partners has achieved a partial exit retaining an approximate 20% stake in the merged entity, with management holding the balance.
Royal Bank of Scotland and HSBC underwrote £25m of senior debt and working capital facilities to support the transaction.
“We first entered into discussions about the combination last March,” said Kevan Leggett, managing director of LDC, explaining that putting the deal together had been a lengthy process due to the uncertain economic environment: “We wanted to ensure we put a robust financial structure in place.”
Leggett believes the cautiousness of the structure proposed by LDC and Advent Venture Partners meant that raising debt from RBS and HSBC, incumbent lenders to Snell & Wilcox and Pro-Bel respectively, was “less painful than you’d expect.”
Advent Venture Partners backed the £22m buyout of Snell & Wilcox in 2002. LDC funded the £11m buyout of Pro-Bel in 2003.
“The fact that we’re not a traditional limited partner fund does allow us to take a longer-term view of things. I suspect we may have found investing new money in a five and a half year old deal harder if we were a typical fund,” commented Leggett.
LDC invests from the balance sheet of its parent company, Lloyds Banking Group. Historically the firm has been one of the most prolific buyout firms in the UK, and says it is sticking to its strategy and aims to invest £250m of new equity in deals in 2009.
This deal is the second it has completed this year. In February it backed the £32.5m buyout of Quantum Specials, a supplier of tailor-made medicines to the pharmaceutical industry.
LDC’s investment activity is in stark contrast to the rest of the UK’s buyout market, which, hamstrung by the lack of debt available has seen just a handful of deals so far this year.
Source: Thomson Merger News