Deal in Focus: Syntegra reaps 5.1x on contested AML trade sale

José Rojo
15 February 2016

Tweet
Facebook
LinkedIn
Google plus
Send to

Six years after carving out AML Systems, Syntegra Capital and Picardie Investissements have sold the French headlamp leveller business to Johnson Electric for €65m. Although a profitable move for the GP duo, the exit sparked hostilities with the managers. José Rojo reports

Signed in early February, Syntegra and Picardie's sale of French headlamp leveller business AML Systems is expected to complete in late May 2016, following employee consultations and regulatory approvals.

While the sale has resulted in a 5.1x return and a 33% IRR for Syntegra, the process itself was somewhat turbulent.

Syntegra began working towards an exit in December 2014, unquote" understands. The firm mandated cross-border boutique Lincoln as well as EY to set up a limited auction for the asset, and both trade and financial buyers were invited.

Friction between AMS's management and its private equity owners led to the departure of CEO Eric Julien

The process sparked frictions between the management team and its institutional shareholders: the former was keen to sell AML to one of its financial suitors, while the latter was adamant a trade buyer was a better fit with the company's goals.
An unquote" source reports a "very strong misalignment" between both sides. Their differences proved irreconcilable and led to Eric Julien, AML's CEO since 2010, being pushed out from the role by shareholders and replaced by Jacques de Morvan. Once the conflict had been dealt with, an agreement was struck with Johnson Electric, which had submitted a bid for AML.

The agreement will see AML fully acquired by Johnson Electric, an automotive components supplier listed on the Hong Kong stock exchange. The corporate will finance the €65m purchase via its existing cash reserves and revolving credit facilities. In addition, the company's previous €7.5m debt facilities will be repaid via its own cash reserves, which most recently amounted to €10.6m.

Financial downturn slowdown
Syntegra and Picardie acquired AML in 2010 via a carve-out form former listed parent Valeo.

Valeo had previously approached the pair in 2007, as part of a plan to refocus on its tier one supply operations and let go of tier two suppliers such as AML. The talks were put on hold by the onset of the financial crisis but resumed in May 2009, a source familiar with the situation told unquote". AML's specialisation in smart actuators turned it into an interesting target for the GPs, as the devices became compulsory for cars in China, among other countries.

A deal was struck whereby Syntegra scooped up a 66% stake in AML, followed by the management's 15%. Picardie and a family office where brought on board by Syntegra with each securing an 8% interest, the same source added.

The carve-out saw Syntegra draw equity from its 2004-vintage third buyout fund, which closed on its €245m target in May 2005. The fund currently holds stakes in Gevers, Market Maker and Moleskin.

Throughout Syntegra's six-year tenure, AML has grown to employ 500 staff and pushed revenues from €46m in 2010 to €99.6m in 2015. The Le Bourget-headquartered business has expanded exclusively through organic means, propped up by the recovering global automotive market. Its operations in China have been central to growth: AML's turnover in the country has jumped by €30m following the launch of a production site in Wuxi.

People
Syntegra Capital – Patrick Bergot, Philippe Sevin (partners).
Johnson Electric – Patrick Wang (CEO, chairperson).
AML Systems – Jacques de Morvan (CEO).

Advisers
Vendor – Lincoln (Corporate finance).
Equity – Freshfields Bruckhaus Deringer (Legal).