Deal in focus: HgCapital sells Schleich to Ardian

The sale of Schleich, which produces models of dinosaurs and farm animals, is particularly impressive given that HgCapital postponed its divestment of the company a year ago due to unsatisfactory bids from potential buyers. The firm contracted Goldman Sachs to find a buyer in October 2012, after almost six years of ownership, but was left disappointed by lower than expected offers.

This latest deal sees French GP Ardian buying the toy business via its €2.4bn LBO Fund V vehicle. Launched in January 2012 with a target of €2bn, the fund closed in October 2013 after the GP finalised its spinout from parent company Axa the previous month.

The deal value is understood to stand at €220m, with debt facilities worth €95m provided by DZ Bank and LBBW Bank. The company generated turnover of €106m in 2013, up from €61m in 2006. EBITDA is estimated to be in the region of €20-25m, as a source told unquote" that debt equated to slightly less than 4x EBITDA.

Deal valued at €220m follows successful turnaround

HgCapital Trust received proceeds of approximately £11.8m following the deal.

The fresh capital will enable Schleich to further penetrate international markets and new distribution channels, following a recent agreement to sell Schleich-branded products in Wal-Mart stores in the US.

Toy story
Schleich, a maker of farm and wildlife toy models, was owned by a consortium of three families from its inception in 1935 until its acquisition by HgCapital in December 2006. At the time of the investment, the company had approximately 190 employees; this has since increased to 340. The transaction, in which the management team also took a minority stake, was worth in the region of €100-250m.

HgCapital was introduced to the company by WGZ Beratung and was attracted to the investment due to Schleich's then impressive growth figures, good cash conversion and strong branding. RBS structured a debt package consisting of senior and mezzanine financing.

The company suffered a period of stagnation in 2011 and 2012, leading to a change in management team and the hire of consumer goods and marketing expert Thomas van Kaldenkerken as CEO in January 2013. Following extensive market research, consultation with the newly established distributor's board and the development of new product ranges in the play-world and accessories areas, Schleich saw a 7% growth in sales. Sales for Q1 2014 have already exceeded targets, according to the toy manufacturer.

Recent private equity interest in the toy and games sector has focused on digital gaming platforms, such as mobile gaming apps and web-based multi-player games, including TA Associates' and Summit Partners' $350m investment in Hamburg-based bigpoint.de in April 2011. A year later, OpCapita paid a nominal £1 for insolvent retailer Game, which is now preparing to go public.

Against this trend, HgCapital's sale of traditional toy manufacturer Schleich to another financial sponsor underlines the belief there is still money to be made on the conventional toy market.

People
HgCapital – Justin von Simson
Ardian – Caspar von Meibom

Advisers
Equity – OC&C (Commercial due diligence); Renzenbrink Raschke von Knobelsdorff Heiser (Legal); Wilkie Farr & Gallagher, Mario Schmidt (Legal); PwC (Financial due diligence); Taxess (Tax); Willis (Insurance due diligence); Golder (Environmental due diligence); Macquarie (Debt advisory); Commerzbank (M&A).
Vendor – Baker Tilly (Commercial due diligence); Clifford Chance (Legal); EY (Financial due diligence); KPMG (Tax); Goldman Sachs (M&A).

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• Topics
• DACH
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• Ardian (formerly Axa PE)
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