Bain-led consortium to acquire ITP Aero in EUR 1.7bn deal

Other parties in the consortium include Sapa Placencia and JB Capital, although Bain is open to negotiating with additional Spanish and Basque industrial partners wishing to join the consortium until the end of June 2022, according to a statement. This consortium will account for up to 30% of the company's equity.

While Rolls Royce will receive cash proceeds of EUR 1.7bn, the company has an enterprise value of EUR 1.8bn, according to the same statement.

Bain intends to support ITP Aero in its development as an independent company and through the recovery of the aviation market. The GP also intends to invest in the firm's national defence programmes in Spain, as well as with potential expansion to US programmes. Industry consolidation, research and development investment, and ESG strategy development are also part of the GP's plans for the company.

The GP is currently deploying equity via Bain Capital Europe V, which held a final close in July 2018 on EUR 4.35bn.

The deal is expected to close in H1 2022.

Unquote sister publication Mergermarket first reported in July 2018 that ITP Aero was a likely candidate for future disposals, citing sector bankers. Rolls Royce had wholly owned ITP Aero since July 2016, when its joint venture partner Sener exercised a put option, requiring Rolls Royce to acquire its 53.1% stake. At the time, a Spanish company was cited as a likely buyer, given the limited number of potential international trade buyers.

Spain-based Indra confirmed in July 2019 that it was in discussions with Rolls Royce for the potential acquisition of ITP Aero, confirming later that month that discussions had ended. Spanish media reported a potential purchase price of EUR 1bn at the time.

Rolls Royce confirmed in September 2020 that it was exploring funding options, including a EUR 2.5bn equity raise, following media reports.

Spanish publication El Economista reported in January 2021 that Rolls Royce was expected to invite potential buyers to a limited auction process for ITP Aero, with Carlyle, CVC, KKR, and a consortium of Towerbrook and Onex cited as potential bidders.

Mergermarket reported in February that the process was set to comprise only a select number of sponsors, including Bain Capital, later citing sources who said that any potential US-headquartered buyer would need to engage with EU foreign direct investment (FDI) legislation. The sale process subsequently involved discussions with the Spanish and Basque governments, given the strategic importance of the company.

In April 2021, Mergermarket reported that Onex had dropped out of Towerbrook's bidding consortium for ITP Aero following a disagreement on how to value Spanish market peer Aernnova. Towerbrook acquired a majority stake in Aernnova in 2017 in a EUR 900m deal and had aimed to set up a merger between the two companies. The same report stated that Carlyle and CVC had left the process.

El Economista reported later in April that Cinven had joined the process, which had now seen offers starting at EUR 1.3bn. By June, Cinven and Bain were the only bidders left in the process, according to further press reports. Mergermarket reported later that month that both parties had made offers of around EUR 1.5bn and were expected to attract local industrial partners to join a consortium, given the regulatory conditions and the ongoing risk that the Spanish government could veto the deal due to pressure from the Basque government and its Basque Nationalist Party (PNV).

Mergermarket reported in July that Cinven had teamed up with Spain-based aerostructures and aeroengine components producer Aciturri in the bidding process.

Rolls Royce confirmed in early August that it had entered into exclusive negotiations with a Bain-led consortium for the sale of ITP Aero, noting that there was no certainty at that stage that an agreement would be reached.

Private equity deals in the defence and aerospace sectors that have attracted significant regulatory attention include CVC's GBP 4bn acquisition of UK-based Cobham in January 2020. Meanwhile, KKR's acquisition and subsequent IPO of defence and security sensors producer Hensoldt (formerly part of Airbus and known as Defence Electronics) reportedly attracted scrutiny from the German Ministry of Defence, given its significant contracts with the company.

Company
Founded in 1989, ITP Aero produces engine components for aircraft, specialising in turbines. The company posted revenues of EUR 735m and EBIT of EUR 40m in 2020. Headquartered in Zamudio and with 16 facilities in Spain, the UK, Mexico, Malta, India and the US, ITP Aero employs 4,000 staff.

People
Rolls Royce – Warren East (CEO).
ITP Aero – Carlos Alzola (CEO).
Bain Capital – Ivano Sessa (managing director); Tobias Weidner (principal).

Advisers
Vendor – Goldman Sachs (corporate finance).

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• Topics
• Buyouts
• Southern Europe
• Industrials
• Spain
• Bain Capital
• Cinven
• CVC Capital Partners
• Towerbrook Capital Partners
• Onex Partners
• Carlyle Group
• KKR