Flexitallic (France) - Oct 2007

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01 October 2007

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OFI Private Equity (OFI) has acquired US-based industrial sealing business Flexitallic from a local private equity firm, in order to merge it with its own portfolio company Siem Supranite, a long-term business partner of Flexitallic. The French buyout house, which is partially listed on Euronext Paris, invested €13.6m in equity in Flexitallic, in a deal valuing the business at E100m. Vendor Cravey Green & Whalen generated a 4.5x multiple from $21m invested over 10 years. OFI will own 55.5% of the newly-merged entity, having invested a total of €22.8m in equity. The balance is to be held by a Siem Supranite’s private stake-holders and management (30%), and mezzanine providers Capzanine and AXA Mezzanine, which hold a combined 14.5%. The combined group has an enterprise value of around €140m, with revenues in excess of €75m and will be headquartered in France.

Sourcing

The opportunity arose as Cravey Green & Whalen’s initial investment approached the 10-year mark, and the private equity firm reluctantly initiated procedures to run an auction in spring 2007. OFI had access to substantial amounts of information about Flexitallic, which provides around 50% of Siem’s industrial supplies. OFI then mandated an Atlanta-based law firm to help conduct negotiations for its successful pre-emptive bid.

Financing

A two-tranche senior debt package worth approximately E75m was provided by Société Générale and Landsbanki, as leverage for the combined entity. Société Générale agreed to arrange the financing despite the turbulence which followed the July 2007 negotiations. Capzanine provided a mezzanine loan, which it partially syndicated to AXA Mezzanine.

History

OFI Private Equity originally backed the buyout of Siem Supranite in October 2006, in a transaction valuing the company at E40m. Cravey Green & Whalen initially invested in growth capital in Flexitallic in April 1997 and have gradually increased their stake in the business since.

Company

Flexitallic designs, manufactures and distributes a range of industrial static sealing products for the oil and petrochemical industries, and generated a turnover of E56m in the year to October 2007. Siem designs and manufactures similar products for the same sectors, but also focuses on the nuclear industry, and recorded sales of E20m in the year to July 2007. The merger will result in significant expertise and geographical synergies. The newly-formed group will aim to develop its nuclear-oriented activity and expand into Asia, where a production facility is currently being built by Flexitallic. Germany will also be targeted. The company generates an EBITDA margin in excess of 20%.

People

Jean-François Mallinjoud, Erwann Le Ligné and Yannick Grandjean worked on the deal for OFI Private Equity, while Michael Long was in charge of the business for Cravey Green & Whalen. Agnes Hugot, Alison Timme and Siggi Haraldsson arranged the debt for Landsbanki, while Anne Bucheli, Marc Alix and Jacques Kastner did so for Société Générale. Laurent Bénard and David Hoppenot worked on the transaction for Capzanine. Jerry Lastovica and Rémi Tolédano are the CEOs of Flexitallic and Siem Supranite, respectively.

Advisers

Debt - Linklaters, Adrien Paturaud, Arnaud Fromion, Eric Fiszelson, Sabrena Silver (Legal)Equity - Antares International Partners, Gary Cole, Warren Dewar (Corporate Finance)Equity - Aon Mergers and Acquisitions Group, Christian Mergier, Delphine Sztermer, Gary Blitz (Insurance Due Diligence)Equity - Arthur D Little Paris, Ben Thuriaux, Kirsty Ager, Max Robinson, Roger Hil (Other Due Diligence)Equity - ERM, Bob Carson, Dave Einolf (Environmental Due Diligence)Equity - Ernst & Young, Bill Casey, Christophe Mangin, Emmanuel Picard, Sylvain Dominici (Financial Due Diligence)Equity - Kilpatrick Stockton, Adwoa Awotwi, Chintan Amin, Lynn Fowler, Naho Kobayashi, Rich Cicchillo (Legal)Equity - SJ Berwin, Fanny Combourieu, Maxence Bloch, Patrick Guarda, Pierre-Louis Sevegrand (Legal)Vendor - Haynes and Boone, Art Berner, Kendall Hollrah (Legal)Vendor - Sagent Advisors, Erik Jensen, Hal Ritch (Corporate Finance)