PAI and Carlyle team up for $900m CST deal

Greg Gille
04 April 2014

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PAI partners and Carlyle have entered exclusive talks with Schneider Electric to acquire the group's Custom Sensors & Technologies (CST) division for around $900m.

Schneider will reinvest $100m to retain a stake of around 30% in CST. Management will also invest in the spinout, with PAI and Carlyle splitting the remainder of the equity equally. The transaction did not go through an auction process.

Should the deal go ahead, it would mark the first investment for PAI and Carlyle's latest respective funds. PAI would draw capital from PAI Europe VI; the GP held a first close on €1.4bn for the vehicle in January, and the CST deal would kickstart the fund's investment period. PAI Europe VI was officially launched in Q2 2013 and the fund is believed to have a hard-cap of €3bn.

Carlyle, meanwhile, would invest via its CEP IV vehicle, which is currently being raised. The Europe-focused fund was launched towards the end of 2012 and is understood to have a target of around €3bn.

The CST deal would be the second-largest buyout of the year so far in France, where large-cap dealflow has been lacklustre for some time. Back in February, Ardian backed the buyout of Vinci's car parks division for an enterprise value of €1.96bn (around 9x EBITDA). Both deals are notably primary transactions sourced from a corporate vendor – large-cap buyout dealflow in France is usually dominated by secondary transactions.

Details surrounding the proposed debt package leveraging the deal have not yet emerged. Ardian remained conservative when financing the Vinci Park deal earlier this year, with a seven-strong banking syndicate providing new investment-grade senior facilities totalling €900m, while €140m of existing debt will be rolled over.

Final negotiations will not get underway before the relevant French employee works councils are consulted.

Carlyle and PAI were not yet available for comment.

Company
Schneider division CST specialises in sensing, control and motion products. It operates under the BEI Kimco, BEI Sensors, BEI PSSC, Crouzet, Crydom, Kavlico, Newall and Systron Donner Inertial brands. CST targets sectors such as aerospace, transportation and building equipment.

CST posted a $600m turnover in 2013. It employs 4,500 staff in 30 countries.

People
Laurent Rivoire led the deal for PAI, while Carlyle was represented by Jonathan Zafrani.

Advisers
Equity – Deutsche Bank (M&A); Bank of America Merrill Lynch (M&A); Messier Maris et Associés (M&A); Rothschild (M&A); Latham & Watkins (Legal); Weil Gotshal & Manges (Legal).
Vendor – JP Morgan (M&A); Debevoise & Plimpton (Legal).