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KKR clinches $1.12bn Capital Safety buy-out

29 Nov 2011

Global private equity firm KKR has outbid Cinven for a controlling stake in Capital Safety, the British safety harness producer owned by the private equity division that spun out of Candover Investments in April.

Arle Capital Partners has agreed to sell the company to KKR for $1.12bn. Private equity firms EQT Partners and Warburg Pincus were also said to be interested in the sale, as were strategic buyers including US-based 3M, which failed to agree on a price.

Capital Safety manufactures protective gear for the oil and gas and construction industries, such as harnesses, lanyards, self-retracting lifelines and engineered systems. The company posted revenues of $246m for the last financial year, nearly 20 per cent higher than the previous year, and EBITDA of £65m, a £15m increase from last year.

The company was due to be sold in September in a sale process which was cancelled amid market volatility. The acquisition represents Capital Safety’s third consecutive buy-out ownership, after Electra Partners combined Sinco, Protecta and Sala to form the company through a £102m management buy-out in 1998.

Candover bought the company in 2007 for €415m through its €3.5bn Candover 2005 Fund. The firm backed the management team led by Paul Trinder, who became executive chairman, and Pat Velasco, who became group chief executive.

The sale represents a return of 3.6 times since Arle began managing the investment in 2009 and a 2.7 times return on the original investment. Since Capital Safety was acquired from Electra Partners in June 2007 the business has  doubled its revenues to more than $350m.

In statement released late yesterday, Pete Stavros, a director in KKR’s industrials group, said, “We see attractive growth prospects for the safety equipment industry overall, but we believe fall protection is particularly attractive because of the segment’s weighting towards energy and infrastructure and because of the potential for future growth due to further development of safety regulations, particularly in emerging markets, and increased compliance globally.

“As a market leader with a highly focused business model and outstanding relationships with both distributors and end-customers, Capital Safety is well positioned to capture the significant secular growth ahead of it. In addition, the management team is exceptionally broad and deep, and has a real “can do” attitude, culture of innovation, and richness of end-customer insight that sets it apart from the competition,” he added.

The sale represents the third exit by the Arle team following the successful realisations of Ontex and Equity Trust. In total, the team will have realised proceeds of €728m from these three exits.

Arle Partners agreed in December last year to take over the funds formerly managed by Candover Partners from the listed holding company which owned it. The newly-formed unit, which went live in June, currently manages more than €2bn of investments.

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