Industrials sector comment – October 2011

Date

Melrose’s withdrawal from its pursuit of Charter leaves US group Colfax free to wrap its agreed £1.5bn acquisition of the UK industrial group.

Colfax’s offer of 910 pence per share is at a 7% premium to the original 850 pence per share offer made by Melrose. The US manufacturer of fluid handling products manufacturer has triumphed despite Melrose having completed its due diligence on Charter and having agreed terms with its financing banks. However, the UK group’s cash-and-share offer was ultimately a casualty of the recent decline in equity markets which effectively reduced its offer for Charter by 18%. As result the real value of the group’s offer for Charter fell to just 806 pence per share.

Colfax’s offer includes 730 pence per share in cash and 0.12 new shares in Colfax. The proposed transaction will be financed by a combination of balance sheet cash, new bank debt and new equity. New and existing investors including BDT Capital Partners are providing new equity of approximately £510m. Deutsche Bank and HSBC, from which Colfax has received around £1.3bn in commitments, will arrange the new bank debt. The acquisition will add Charter’s range of air and gas handling equipment and welding equipment to Colfax’s range of fluid handling products for heavy industrial and process applications.

Deals

Ultra Electronics Holdings plc has acquired AEP Networks Inc (AEP), a US supplier of secure network communication solutions. The £48m transaction will give the UK defence contractor a presence in the fast-growing cyber security market.

Glen Dimplex plc has acquired Valor Ltd from BDR Thermea Group BV, the parent company of Baxi Group Ltd. Valor is a UK manufacturer and wholesaler of gas fires.

US private equity firm Carlyle has acquired Brintons Ltd, a UK manufacturer of commercial and residential carpets. The £36m transaction, facilitated through a pre-pack administration, sees Carlyle assume Brintons’ debt of £18m and commit a further £18m to Chinese manufacturing operations.

Maven Capital Partners has backed the management buy-out of Dantec Hose Ltd, a UK manufacturer of composite hoses. Dantec produces flexible connections for applications in the petrochemical industry, as well as the chemicals, marine, motorsport, railway and transportation sectors.

Asia File Corp Bhd has acquired the Higher Kings Mill paper mill of DS Smith Group plc. The transaction will reinforce the Malaysian group’s presence in the European education and filing papers markets.

Wolfson Microelectronics plc has acquired Dynamic Hearing Pty, an Australian developer of audio processing software for personal communication devices. Dynamic Hearing specialises in noise reduction and transmission solutions for Bluetooth headsets, hearing aids and mobile phones.

Elta Group Ltd has acquired Duct Products (1998) Ltd, a UK manufacturer of heating and ventilation products. The acquisition of Duct Products, which specialises in the production of fire dampers, grilles and louvres, will boost Elta’s presence in the Irish air conditioning, heating and ventilation market.

LKQ Corp has acquired Euro Car Parts Ltd, a UK distributor of automotive aftermarket parts. The £225m acquisition will provide the US group with an entry point to the European market.

Vitec Group plc has acquired Haigh-Farr Inc, a US designer and manufacturer of flight-body antennae for communications applications. The £23m acquisition will complement Vitec’s existing range of digital communication transmission technologies for mission-critical applications in the aerospace, broadcast, government, law enforcement and military markets.

CH2M Hill Companies Inc has acquired Halcrow Group Ltd, a UK provider of consulting engineering services. The £124m acquisition will reinforce CH2M Hill’s presence in the market for consulting engineering, project management and sustainability services for the aviation, infrastructure, marine, power, railway, transportation and water sectors.

Independent Forgings & Alloys Ltd (IFA) has been the subject of a secondary buy-out backed by Barclays Corporate. IFA, originally formed by the buy-out of the open die forging division of Doncasters Group Ltd, is a manufacturer of open die forgings, precision bars and rings. The transaction provides an exit for UK private equity firm YFM Equity Partners.

SNC-Lavalin Group Inc has acquired Interfleet Technology Ltd, a UK provider of railway engineering and technology integration services. The acquisition will reinforce the Canadian group’s European activities and add Interfleet’s expertise in railway systems engineering and rolling stock management to its portfolio.

Mechel OAO has acquired Invicta Merchant Bar Ltd, a UK producer of high-quality rolled iron. The £82m transaction will see Invicta Merchant Bar ue raw materials supplied by the Russian group’s Ukrainian metals subsidiary DEMZ.

Acal plc has acquired MTC Micro Tech Components GmbH, a German supplier of electromagnetic shielding products for industrial electronics applications. The acquisition is part of Acal’s specialisation strategy with a focus on adding niche products which can be distributed through the group’s pan-European network.

Fluidmaster Inc has acquired Opella Ltd, a UK manufacturer of toilet filling and flushing products. The acquisition will expand the US group’s product portfolio by adding Opella’s range of connectors, fill and flush valves, shower traps and sink strainers.

Caterpillar Inc has acquired Pyroban Group Ltd, a UK developer and manufacturer of explosion protection equipment. Pyroban specialises in hazardous area safety solutions used in the industrial materials handling, marine, mining and oil and gas industries. The acquisition will allow Caterpillar’s Global Petroleum division to offer an enhanced range of Cat brand fully-integrated power solutions and grow its presence in the hazardous area protection segment.

UK supplier of fluid power products Quick Hydraulics Ltd has been acquired in a management buy-in. The transaction sees Andrew Esson acquire the supplier of distribution, engineering, manufacturing, monitoring and training services for specialist hydraulic equipment.

FDS Group SA has acquired Sealex Ltd, a UK supplier of hose products and sealing gaskets, as well as personal protective equipment and spillage absorption materials. The transaction follows on from the French group’s recent acquisition UK-based New-Seal Gasket Ltd.

UK private equity firm Oxford Investment Group has acquired Sealine International Ltd from Brunswick Corp. Sealine is a UK designer and manufacturer of sports cruiser boats and yachts.

UK private equity firm Greenfold Partners has acquired certain assets of Simclar International Ltd from the administrator. Simclar’s sheet metal and wiring products for electronics applications will complement those of Greenfold Partners’ investee company Ionix Systems Ltd.

Spectris plc has acquired Sixnet LLC, a US designer and manufacturer of rugged remote monitoring equipment for the heavy industrial and process markets. Sixnet’s Ethernet networking switches and wireless automation solutions will complement Spectris’ Red Lion Controls business within the group’s Industrial Controls division.

UK private equity firm Elysian Capital has backed the management buy-out of Tekmar Energy Ltd a UK designer and manufacturer of sub-sea cable protection systems. The transaction will allow the company’s management team to expand Tekmar’s presence in the market for turnkey solutions for the offshore wind sector.

Brammer plc has acquired the Buck & Hickman tool distribution business of Travis Perkins plc for £28m. Buck & Hickman is a supplier of over 60,000 branded and own-brand industrial and maintenance products with a focus on hand and power tools, health and safety equipment, janitorial equipment and personal protective equipment. The business originally formed part of BSS Group plc which was acquired by Travis Perkins for £553m in May 2010.

G&L Beijer AB has acquired the UK operations of United Refrigeration Inc. United Refrigeration UK is a suppliermof commercial refrigeration equipment which will reinforce the Swedish group’s wholesaling operations in the UK market. The £22m transaction includes United Refrigeration’s French operations.

Dutch private equity firm H2 Equity Partners has acquired a 50.1% stake in Unipart Automotive Ltd, a division of Unipart Group Ltd. Unipart Automotive is the largest distributor of car parts, garage equipment and workshop consumables in the UK and will complement H2 Equity Partners’ investment in Sator Holding BV, a Dutch distributor of automotive parts in the Benelux and Northern France.

Hunting plc has acquired WL Doffing LP, a US provider of precision machining services for the energy industry. The £14m acquisition will allow Hunting to expand its expertise into the machining of high tolerance components and equipment used in logging-while-drilling and measurement-while-drilling applications in the oil and gas industry.