Cinven sells CeramTec to BC-led consortium

Oscar Geen
11 October 2017

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Cinven has sold German ceramics manufacturer CeramTec to a BC Partners-led consortium.

The company sold for an enterprise value of €2.6bn, resulting in a 3.2x return for Cinven, unquote" understands. The GP acquired the company for a €500m equity investment in a €1.5bn transaction in June 2013.

BC Partners, the private equity owners of unquote" parent company Acuris, led a consortium of PSP Investments and Ontario Teachers' Pension Plan to acquire the company for a 13.2x entry multiple.

To support the transaction, the GP drew equity from Fund X, which had raised €6bn in July and is currently 30% deployed, according to a source close to the situation.

Leverage pitches were reported to be as high as 8x CeramTec's €196m EBITDA by unquote" sister publication Debtwire, though this was based on an expected enterprise value of €2bn. The final leverage was 7.5x, not including the €150m PIK note that takes it over 8x, according to the source.

BC Partners was competing against CVC Capital Partners and Partners Group in the second round of the auction, as well as two trade buyers, according to the source.

Under Cinven's ownership, CeramTec's revenues grew from €425m to €538m and the EBITDA margin improved from 32% to 37%. The number of staff increased by 300 to 3,400.

The GP said it streamlined the firm by reorganising the 16 independent business units into two business segments, medical and industrials. It also added additional capacity by investing €40m in a medical plant expansion at Marktredwitz, and acquiring US-based DAI Ceramics and UK-based Electro-Ceramics.

BC was in the final round of the original auction in 2013, and came in second to Cinven, according to the source. This helped the GP move very quickly in putting together a bid when the company came up for sale, the source added.

The acquirer now plans to continue the expansion strategy started by Cinven. The medical side of the business will continue to operate as usual, given its high profitiability, but on the industrials side the company will explore new product lines, according to the source.

Cinven originally explored a public listing in 2015, giving mandates to Bank of America Merrill Lynch and Morgan Stanley, but the process did not advance, as unquote" sister publication Mergermarket reported at the time.

In August this year, Cinven again appointed BAML and Morgan Stanley to run a dual track process, though on that occasion the GP expressed a preference for a sale over a listing, according to Mergermarket.

Previous funding
Cinven acquired CeramTec in 2013 from Rockwood for an enterprise value of €1.5bn, comprising a €500m equity investment and €1bn debt package arranged by Deutsche Bank, RBC and UBS.

Cinven drew equity from its fifth fund to support the transaction. The vehicle held a final close on €5bn in March 2013.

In May 2015, CeramTec acquired Ohio-based DAI Ceramics for an undisclosed sum. In February 2017, it acquired UK-based Electro-Ceramics, a division of Morgan Advanced Materials, for an enterprise value of £47m.

Company
Founded in 1903, CeramTec is based in Plochingen, Germany. The company employs 3,400 staff and operates 20 facilities internationally.

CeramTec manufactures advanced ceramics for the medical, automotive, industrial and electronic markets. It offers more than 10,000 products including components for hip joint prostheses as well as cutting tools and ballistic ceramics for armour.

The company recorded revenues of €538m in the 12 months to June 2017, as well as an EBITDA of €196m.

People
BC Partners – Stefan Zuschke (managing partner).
Cinven – Bruno Schick (partner).
CeramTec – Henri Steinmetz (CEO).

Advisers
Acquirer – PwC (financial due diligence, tax); Freshfields Bruckhaus Deringer (legal).
Vendor – Bank of America Merrill Lynch (M&A); Morgan Stanley (M&A); Clifford Chance (legal); McKinsey & Co (commercial due diligence); PwC (financial due diligence); EY (tax); ERM (ESG due diligence).