Graphite reaps 3.7x on £215m sale of MTS to Sumitomo

The sale represents a 3.7x return for the Graphite Capital Partners VI fund after a 10-year holding period. The GP's senior partner, Markus Golser, told unquote" MTS represented "by far" the largest asset remaining in the GP's sixth vehicle, which is now more than 90% divested.

The transaction is the latest in an ongoing wave of high-profile exits from UK-based portfolio companies to international buyers. It comes less than a month after Cinven sold web services provider Host Europe Group to trade buyer GoDaddy for €1.69bn and a fortnight after Epiris and Alchemy Partners sold holiday park operator Parkdean Resorts to Canada-based private equity house Onex for £1.35bn.

Graphite began off-market talks with Sumitomo over a deal for MTS in early 2016, with the target company and its trade buyer capitalising on a pre-existing trading partnership, Golser said. The GP had previously come close to divesting MTS five years ago, Golser added, explaining that a "small set of buyers" had declared an interest, though talks eventually proved fruitless.

Under Graphite's tenure, MTS has undertaken an acquisitive growth strategy, making a total of 36 bolt-ons. Golser said the acquisitions were primarily financed via a number of extensions to the business's debt and acquisition finance facilities. The GP has not made additional investments in the company during its tenure, Golser confirmed, nor has it previously realised any of its original investment.

The company's wholesale operations were primarily focused on the south of England at the time of the GP's initial investment, Golser said. This division of the business has since been expanded to enable it to provide nationwide delivery within 24 hours of any order being placed.

However, Golser also said the retail division of MTS, Protyre, remains more "southern-centric". According to a statement released by Graphite, Protyre has expanded from 16 stores to 99 since its initial investment. It has also increased its turnover from £150m to £320m and grown its headcount from 500 to 1,600.

The transaction is subject to regulatory approval.

Previous funding
Graphite backed the £85m buy-in management buyout of MTS from founder Tony Todd in February 2006. The GP took a 72% stake in the company with management retaining the balance in a deal supported by a debt package from RBS.

Company
Founded in 1972 and headquartered in Micheldever, near Winchester, MTS is a distributor and wholesaler of tyres for cars, motorbikes and all-wheel-drive vehicles. It supplies tyres from premium, mid-range and budget brands to 6,000 retailers, as well as through its own retail chain Protyre.

MTS generated EBITDA of £18m in the year ending March 2016, according to Golser, though it is anticipated that this figure will be significantly higher in the current financial year.

People
Graphite Capital – Markus Golser (senior partner); Omar Kayat, Mudassir Khan (partners).
Micheldever Tyre Services – Duncan Wilkes (chief executive).

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