ESG concerns limit bidders in LMB Aerospace sale

Francesca Veronesi
05 November 2021

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First-round bids for France-based LMB Aerospace were collected last week, but the company's focus on defence means a significant number of financial sponsors and lenders need to give the deal a pass, according to several sources.

"LMB is very well-known in France and it would be a great deal, but ESG criteria just make it difficult for bidders and lenders to back it. It's not for everyone," the first source said. A point of concern of a potential sponsor bidder would be the eventual sale in some years' time, when ESG practices are likely to have pervaded the private equity market even more, the same source added.

The sale of the manufacturer of fans and electric engines for civil and military aeronautical applications is geared towards both sponsors and trade players, one of the sources said.

The company is marketed based on EBITDA of EUR 13m, two sources said. One source pointed out that the company is expected to generate a EUR 18m EBITDA in 2021.

Amala Partners is advising owners Raise Investissement, MBO & Co and Arkea Capital on the sale, three sources said.

There is a US angle to the deal, given that LMB has a franchise in the US — LMB North America Inc, based in Miami — and the group is looking to develop in the region. Therefore, a new owner either headquartered in the US or with a good knowledge of that market will have a clear advantage, according to two of the sources.

The sale of French defence-focused companies to foreign buyers has proven difficult recently. The French government did not give its approval to the sale of night vision technology company Photonis, owned by Ardian, to US-trade Teledyne in Q4 2020, the fourth source pointed out. The company was finally sold to HLD for EUR 370m in Q1 2021, as reported.

In 2018, Raise acquired a majority stake in LMB Aerospace from previous owner MBO & Co, which reinvested in the business. Arkea, as well as LMB's management, acquired a minority stake on that occasion.

MBO & Co had bought the business from US-based industrial group Honeywell in 2012, as reported by Capital Finance at the time.

LMB is a supplier of fans, blowers, motors and specialised rotating machines, serving the aerospace, defence, energy and industrial markets. Its products are used in aircraft, helicopters, pods, military vehicles and space vehicles. The company is headquartered in Malemort sur Corrèze and has a presence in countries such as India, Israel, Italy, Singapore, Turkey, the UK and the US, among others, according to its website. The company's president is Thomas Bernard, who is based in the US.

Raise and MBO & Co declined to comment. Amala and LMB Aerospace did not reply to a request for comment. Arkea was not immediately available for comment.