BC Partners backs EUR1.7bn Baxi merger

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BC Partners is on its way to the fundraising trail, after agreeing last week to back the merger of its boiler maker Baxi with Dutch rival De Dietrich Remeha Group. The EUR1.7bn deal will see the private equity house invest EUR100m, meaning BC will have reached the 60% investment threshold to put it on course to raise fresh funds. BC raised EUR5.9bn for its 2005 fund, and its five-year investment term expires next November.

The merger is expected to help Baxi repay its £445m debt pile. Approximately £45m of this debt is due to mature this year. If the merger does not close, the company will be unable to repay it.

In 2007, £40m was injected into Baxi to reset its banking covenants. The company's performance improved last year, with operating profits increasing by nearly a third to £89.9m.

The merged group will become Europe's third-largest boiler maker with 6,400 employees and 2008 sales of EUR1.8bn.

In 2004, BC bought Baxi from Electra and Candover for about £660m, leaving Electra with a small holding. After the merger with De Dietrich, BC and Electra will be left with a combined stake of just less than half.

The merger is still awaiting approval from Baxi's creditors.

Other UK investments in BC's portfolio include estate agent Foxtons, which BC acquired in May 2007 at the height of the boom for a price tag thought to be in the region of £390m; and Fitness First, purchased in 2005 in a deal valued at £800m. Mizuho provided debt to support both transactions.