Caledonia buys Deep Sea Electronics for £162m

Alessia Argentieri
15 October 2018

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Caledonia Investments has acquired UK-based Deep Sea Electronics (DSE) in a transaction that values the business at ТЃ162m.

Unquote understands that the value equates to 10.4x the company's EBITDA of £15.5m.

The vendors are Deep Sea founder and CEO Ed Sheader and chair Stan Archer.

According to a statement, Caledonia bought a 98.9% stake for £117.2m and provided a short-term bridging loan of £50m, which will be replaced in due course by external bank debt. In addition, the management team, led by managing director David Thomson, invested £1.7m for the remaining 1.1% stake. The final enterprise value will be £162m rather than the total £168.9m of the original investment due to equity adjustment for fees and working capital requirements, Unquote understands.

The company plans to use the fresh capital to expand its global presence and extend further its product offering.

Unquote understands that Caledonia's head of unquoted investments, Duncan Johnson, and investment director Chris Hodges will join the company's board to support the management team in this new phase of expansion.

This is the second acquisition made by Caledonia in the last few months, following a £92.5m investment in July for Cooke Optics, a UK manufacturer of high-end cinematography lenses.

Company
Founded in 1975 and headquartered in Hunmanby, Yorkshire, DSE designs and manufactures generator control modules, auto transfer switch, engine and off-highway control modules and intelligent battery chargers.

The company operates facilities located in Mansfield, UK, Illinois, US, and Haryana, India, employs 170 staff and sells its products in 150 countries worldwide, both directly and through a distributor network. Deep Sea reported gross profit of £21.2m, profit before tax of £12.8m and EBITDA of £15.5m from revenues of £37.8m in the financial year ending 31 May 2018.

People
Caledonia Investments – Duncan Johnson (head of unquoted investments); Chris Hodges, Tom Leader (investment directors); Theo Tizard (investment executive).
Deep Sea Electronics – David Thomson (managing director).

Advisers
Equity – Taylor Wessing (legal); PwC London (financial due diligence); Deloitte (tax); Wyvern Partners (debt).
Company – GCA Altium (corporate finance); Addleshaw Goddard (legal); CiL (commercial due diligence); PwC Leeds (financial due diligence).