Souter takes majority stake in Stone restructuring

Katharine Hidalgo
11 December 2019

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Souter Investments has acquired a majority stake in Stone Group from RJD Partners, in a restructuring of the IT services provider.

Unquote understands that RJD initiated a sales process for the company earlier this year, but decided to maintain an investment in the new holding company controlling Stone Group instead.

Several LPs in RJD's fund have reinvested in the new vehicle, including the partners of RJD itself. David MacLellan, chairman and founder of RJD, will act as the non-executive chair of the business.

Shawbrook Bank provided debt facilities for the transaction.

Stone was an RJD Private Equity Fund II portfolio company. LPs in the fund include Aviva Investors, the European Investment Fund and the Royal London Mutual Insurance Society, according to Unquote Data. The second-generation fund closed on £180m in 2007 and has exited most of its portfolio, including Character World, Comtec and Dunham Leisure.

Stone Group has made a number of investments in its business since RJD initially invested in 2008. In 2009, the company invested in its in-house IT asset disposal facility, and in 2019 it acquired specialist PC gaming firm DinoPC Stone.

Previous funding
BEGF originally invested £4m in Stone Group in a buyout valued at £20m in February 2005. Barclays Leveraged Finance provided a £7m term debt, a £2m revolver and working capital facilities of up to £5m.

Nova Capital Management acquired the controlling stake from BEGF in 2005.

RJD led the £28m management buyout of the company in 2008, with Nova fully exiting for an IRR of 37.7%.

Company
Founded in 1991, Stone Group was established as an original equipment manufacturer and is now an IT reseller, retaining its own Stone-branded hardware products within a broader portfolio founded on strategic partnerships with HP, Lenovo, Dynabook and Acer.

Alongside its traditional hardware offerings, Stone has developed a range of IT infrastructure services. The company is headquartered in Staffordshire and reported revenues of £81.6m for 2018, up from £73.6m for 2017 and an operating profit of £2m in 2018, up from £946,725 in 2017.

People
Souter Investments – John Berthinussen (investment director).
Stone Group – Simon Harbridge (CEO).

Advisers
Equity – Dickson Minto (legal); BDO (financial due diligence); Neotas (IT due diligence); FWB Park Brown (management due diligence); Marsh (insurance due diligence); Cadence Advisory (debt advisory).
Vendor – Osborne Clark (legal).
Management – Freeths (legal).
Debt – Squire Patton Boggs (legal).