Deal in focus: Wise joins Muzinich in Primat SBO

Amy King
02 December 2014

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Last week, Italian GP Wise backed the secondary buyout of Primat, a protective treatments producer, with support from New York-based lender Muzinich, marking the latter's first deal in Italy. Amy King reports

In late November, Italian GP Wise backed the secondary buyout of Primat, an Italian producer of protective treatments for mechanical parts, taking over the asset from Arner Private Equity. The transaction was supported by a €15m bond, underwritten by New York-based Muzinich in its first deal from the Muzinich Italian Private Debt Fund, which held a first close on €156m in April. Wise drew down capital from Wisequity III, which holds €180m and is now more than 65% invested.

Having met the company a year ago, Wise had been aware of the asset for some time, says Fabrizio Medea, partner at Wise: "Six months ago, we had the opportunity to meet the CEO of the company so we could understand the strategic position of the business and its plan. We really liked the CEO and he has played a big part in the deal with us."

Thanks to an existing relationship with Muzinich, the GP was able to contact the lender regarding the opportunity, securing mutual exclusivity on the deal alongside the transatlantic lender. Both parties then began the due diligence process in partnership.

"We decided to work on this deal together because it needs investment and real flexibility in the beginning," says Medea. "We believed Muzinich was the right partner because they can design a debt profile directly based on the needs of the company. We basically did due diligence in parallel so that we could act quickly and both be confident at the end of the process that the deal needed to be done."

Founded in 1972, Primat produces protective treatments for mechanical parts, including screws, bolts and fasteners. Its anti-corrosive zinc treatments coat mechanical small part components for the automotive sector. The business has a headcount of around 70 and a turnover exceeding €20m.

Turncoat
In 2000, there was a change in regulation that banned the use of some chemical treatments in the automotive sector. "The company then started to invest in the new process, which was based more on coating and less on chemical treatment," explains Medea. "So they became one of two leaders in Italy for this kind of process. Arner Private Equity continued this strategy, investing in new processes and technologies focused on coating.

"We understood that there is a good level of entry barriers in this industry now across the spectrum, from the company that produces fastener coatings to those who produce the materials that we use to coat, the whole line is now certified. So it is not easy for new players to enter the industry, and it's not an easy switch to certification for existing players. The industry changed in 2000 from a pure commodity industry, to one that is more about technology."

Based in Olginate, Lombardy, the business is situated in the same region as the three largest European producers of screws, bolts and fasteners; Brugola, Agrati and Fontana. "It's a kind of natural monopoly position, in a way," says Medea. "And more than 85% of what we treat goes abroad; so if you look at the invoice, revenues are Italian, but the reality is that the parts are sold all over the world, primarily in Europe and the US."

The new owners intend to continue the strategy of their private equity predecessor, investing in technology and processes. Organic and acquisitive growth plans will be followed, says Valeria Lattuada, head of Muzinich Private Debt Fund: "We were able to offer the company a medium- to long-term financing instrument, tailor-made according to the specific development plans of the company and taking into account the peculiarities of the business.

"In our view, the seven-year tenure, as well as the back-ended amortization features of the note allow management for the necessary flexibility over the next few years to pursue the strategic investments instrumental for the company's growth and to further strengthen its leading market position." And with a list of potential acquisitive targets already drawn up by Primat's CEO, growth looks set to begin soon.

People
Wise – Fabrizio Medea, Luigi Vagnozzi
Muzinich Italian Debt Fund – Valeria Lattuada

Advisers
Equity – Simmons & Simmons, Andrea Accornero, Claudia Scialdone, Davide d'Affronto, Alessandro Elisio (Legal); Studio Spadacini, Luca Guarna, Luca Cassiani (Tax); Studio Sebastiani, Alessando Sebastiani (Corporate finance).
Debt – Chiomenti, Giorgio Cappelli, Gregorio Consoli, Andrea Martina,
Andrea Didio e Andrea Martino (Legal).