3i exits Hilite in €473m trade sale

Harriet Bailey
29 May 2014

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3i has divested its stake in Hilite, a Germany-based global supplier of engine and transmission components, to a subsidiary of Aviation Industry Corporation of China (AVIC).

The subsidiary, AVIC Electromechanical Systems Co, has acquired Hilite in a deal worth approximately €473m. This represents a 2.3x money multiple for 3i on its original investment of €190m.

3i will garner proceeds of £155m from the transaction – a 32% uplift against 31 December 2013's valuation of £117m and a 17% uplift against 31 March 2014's valuation of £133m.

The company also claims to have grown at a rate of 15% CAGR between 2010-2013, compared to an industry average of approximately 4.5%.

During 3i's three-year period of ownership of the automotive parts supplier, Hilite adapted its strategy to focus on its core business and invested more than €100m in research and development and capital expenditure. It also leveraged 3i's global network to accelerate its expansion into China; Hilite says it is expects to achieve 15% of sales from the market in 2014.

It is understood 3i was originally attracted to an investment in Hilite because of its limited exposure to Asia and the Chinese markets and felt that it could add value in this segment. Having completed this aim and held the company for three years, 3i decided to pursue an exit strategy.

It is believed that 3i and AVIC made contact through the former's network of contacts within the industry. After a number of companies put in bids for Hilite, it was deemed that AVIC had the best fit in terms of price and future plans, according to a source close to the deal.

Previous funding
In May 2011, 3i acquired a majority stake in Hilite in an all-equity transaction, according to unquote" data.

Company
Headquartered in Marktheidenfeld, Hilite operates from eight locations in Europe, North America and Asia. The company supplies automotive system solutions to improve fuel consumption, reduce emissions and enhance performance in passenger cars and commercial vehicles. Its product segments are Variable Valve Timing and Double Clutch Transmissions.

Hilite employs approximately 1,370 people and generated revenues of €389m in 2013. It was founded in 1999.

People
Ulf von Haacke is managing director of 3i. Karl Hammer is CEO of Hilite.

Advisers
Equity – Morgan Stanley (Corporate finance); Wilkie Farr & Gallagher (Legal); EY (Financial due diligence).