KKR buys CSG from Arle for $1.12bn

KKR was attracted by the growth prospects for the safety equipment industry - a $20bn market. It also believes fall protection in particular is set to benefit from increased demand in the energy and infrastructure industries, as well as from the ongoing development of safety regulation worldwide.

The transaction is expected to close in January 2012.

Debt
UBS, Morgan Stanley and KKR Capital Markets provided senior secured credit facilities. In addition KKR Capital Markets also arranged senior unsecured notes with Crescent Capital Group.

Leverage reportedly accounts for around half of deal value.

Previous funding
Electra originally invested £30m in the £98m buyout of CSG in 1998. The deal was refinanced in 2005; Electra realised £65m and reinvested £20m in equity and mezzanine.

In 2007, Electra sold CSG to Arle (then Candover) in a $565m SBO. Debt and mezzanine finance were provided by Bank of Scotland. Electra realised gross proceeds of £113m and reinvested £18m to retain a 10% stake in the business.

Under Arle ownership, CSG doubled its revenues to more than $350m. The group's manufacturing footprint was in part migrated to lower cost countries, and its product and service offerings were broadened. In addition, CSG accelerated its expansion into emerging markets with five acquisitions in Europe, Australia and Latin America.

The sale enabled Arle to reap a 2.7x return on the original 2007 investment. Electra is expected to receive proceeds in the region of £54m from the sale - the investment has generated net proceeds (inclusive of income) of £195m over 13 years for Electra, equating to a 22% IRR.

Company
Established in 1998, CSG is a designer and manufacturer of height safety and fall protection equipment such as harnesses, lifelines and anchors. Headquartered in Milton Keynes, UK, CSG also operates out of the US, Canada, Asia, Australia, Latin America and Europe.

The business posted a $246m turnover and $65m EBITDA in the year ending 31 March 2011.

People
Pete Stavros led the deal for KKR. Arle and Electra were represented by Nils Stoesser and David Symondson respectively.

Advisers
Equity - Morgan Stanley (M&A); Latham & Watkins (Legal).
Vendors - UBS, Christian Hess, James Simpson (M&A); ERM, Andrew Bale (Environmental due diligence); LEK Consulting, Simon Glucina, Peter Debenham (Commercial due diligence); Deloitte & Touche, John Cox, David Quantrill (Financial due diligence); KPMG, John Oldcorn (Financial due diligence); Simpson Thacher & Bartlett, Adam Signy (Legal); DC Advisory Partners, Andrew Cunningham (Corporate finance).

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• Topics
• UK / Ireland
• Buyouts
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• United Kingdom
• KKR
• Arle Capital Partners
• Electra Partners LLP
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• Morgan Stanley
• Large-cap buyout