Actaris

Investors

LBO France has backed the tertiary buyout of Actaris from Montagu Private Equity. The former has acquired a majority stake in the manufacturer of energy metering systems, through its fund White Knight VI. The company's management team holds the balance. The transaction value is estimated to stand at around E660m. An interesting aspect of this deal is that LBO France backed the original buyout of Actaris from US oil company Schlumberger in 2001. Two years after Montagu acquired the company in 2003, Actaris' management approached its former shareholders indicating that it wished to be acquired by LBO France. Elizabeth O'Reilly of LBO France explains that since the managers had a 51% interest in the company, they were in a position to choose their shareholders. She continues 'there was definitely the comfort factor involved, since we are familiar with each other. We bought the company second time round at a reasonable price and saw good growth opportunities in the company.' The deal was signed on 20 June after a few months of negotiations.

Debt structure

It has been agreed between the shareholders, that information concerning the structure of the debt shall not be disclosed until September 2005. However, it has been made public that Mizuho Corporate Bank underwrote senior and mezzanine financing to support the buyout.

Previous funding

Previously known as Schlumberger-RMS, Actaris was purchased by LBO France via the newco Actaris Holdings Luxembourg. As a result of the deal, LBO France acquired approximately 70% of the newco, with the management team holding the balance. The company was purchased at an enterprise value reputed to be around E300m and it was thought that equity accounted for around a third of the total. Royal Bank of Scotland and ING Barings jointly arranged a E296m debt package, providing half of the total each. Both groups supplied senior and mezzanine debt, the mezzanine tranche from Royal Bank of Scotland being structured by the RBS Mezzanine team. The debt package had also comprised a full suite of financial covenants including cashflow cover, interest cover and leverage (France unquoteâ€, page 24, December 2001).Elizabeth O'Reilly comments that LBO France clinched the first buyout of Actaris after the EU commission blocked a trade buyer. She explains that a partner at LBO France, Noel Goutard, had managed the Actaris division several years ago and so knew the management and business very well. This, plus the fact they were able to put a firm offer on the table, rapidly secured the deal.Montagu bought the business from LBO France for a total consideration of E420m. Mizuho Corporate Bank arranged a E365m debt package to support the acquisition. This consisted of a E150m seven-year amortising Term Loan A, a E90m eight-year bullet Term Loan B, a E55m nine-year bullet Term Loan C, and a E70m seven-year revolving credit and guarantee facility. Pricing of the facilities was set at European LBO standard with the A-tranche and revolver paying 225 bps over Euribor, the B-tranche 275 bps, and the C-tranche 325 bps. Opening senior leverage was set at 3.3x normalised 2002 EBITDA (page 13, August 2003).Elizabeth O'Reilly explains that LBO France had not initially intended to sell its stake in the company at this stage. Instead the team was planning to refinance the firm. However, Montagu made an unsolicited offer, which promised good returns for LBO France. The IRR was rumoured to stand at 4x the institutional investor's original investment after less than a two-year holding period.

Exit deal

Montagu Private Equity has realised its investment in Actaris, following LBO France's tertiary buyout of the company. Over the past two years, the vendor will have made around 3x the investment it originally made in 2003, with an IRR close to 70%. Sylvain Berger-Duquene of Montagu explains that the group had not intended to dispose of its stake in the business, which had over performed since closing. 'We were looking at a potential refinancing of the company, since the leverage had been reduced to 2x EBITDA owing to good trading and a healthy generation of cash flow'. Berger-Duquene comments that the private equity firm received unsolicited interest from trade buyers and various financial sponsors. He continues 'on that basis we decided to launch a full due diligence, which could be used either for a disposal or for a refinancing, and entered into informal discussions with interested parties. The management expressed its wish to work with LBO France, which already knew the company very well. As a result, when LBO France approached us and offered us the price we were looking for, with limited warranties, we decided very quickly to shake hands on the deal. Thanks to their familiarity with both the company and the management, we exchanged contracts in a very short period of time. On the basis of the price offered, Montagu will achieve its investment objectives more rapidly than anticipated, which would have been very difficult to refuse,' he concludes.

Company

Co-headquartered in Brussels and Montrouge, France, Actaris started out in 1872 as a workshop manufacturing gas meters in France. Nowadays, the company produces metering systems used to measure utility flows, such as electricity, gas, water and thermal energies. It has a 25% market share and has 60 sites in more than 30 countries across Europe, Asia and South America. The firm generated a turnover of E650m in 2004 and employs around 6,000 staff worldwide.During Montagu Private Equity's tenure, Actaris's management team focused on keeping costs to a minimum, while boosting sales through developing its international network and investment in R&D to sustain product innovation. The company is anticipating guaranteed growth from its new product, which will be launched shortly. The company's EBITDA increased from E88m in 2002 to E94m in 2004 and is expecting to reach E97m by the end of 2005.In 2003, Montagu Private Equity decided to approach LBO France off its own back, since it saw huge potential in the company. Sylvain Berger-Duquene comments that when LBO France purchased the company in 2001, the company was in a turnaround phase. 'By 2003, the firm had been significantly restructured and several factories had been closed down,' he continues. 'Actaris had begun to develop new AMR (advanced meter reading) technology to enable meters to be read from afar. Although the product line had already been launched, we still believed it could go a long way,' he asserts.Berger-Duquene affirms that the group had approached LBO France when they were considering a refinancing. 'We convinced management to roll over almost all of their proceeds to us, to increase our stake in the equity. We offered a price that allowed LBO France to make a very good deal and we followed through with the deal very swiftly.

People

Robert Daussun, CEO, and Thomas Boulman, investment director, led the deal for LBO France. Denis Leroy and Sylvain Berger-Duquene managed the exit for Montagu Private Equity.

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