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Advent International acquires stakes in Hermes UK and Germany

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Advent International has acquired a 75% and 25% stake in parcel delivery firm Hermes' UK and German businesses, respectively.

The GP is acquiring the stakes from parent company Hermes, a portfolio company of German conglomerate Otto, which will retain the remaining 25% in the UK business.

The deal value was not disclosed, but according to several news reports, including the Financial Times and Reuters, the GP paid €1bn for both stakes.

With the transaction, the GP will invest further into the company's technology and customer service. 

Debtwire reported in May this year that Advent was out in the market trying to raise a £400m debt package for the deal, but that it was proving to be difficult due to the asset's modest margins. 

According to a source close to the matter, the GP deployed equity from its $17.5bn Advent International GPE IX fund, which reached a final close in June 2019. The deal is the GP's fifth investment from the vehicle, which also recently invested in elevator manufacturer Thyssenkrupp Elevator.

According to the source, the sale process was already in motion two years ago, when Otto started looking for a strategic partner for the company; Mergermarket reported that the group hired Rothschild for the process.

The source also said that there has been a structural shift in demand for home deliveries over recent years, which has been accelerated as a result of Covid-19. 

According to its annual accounts, Hermes UK generated £860m in revenues, while Hermes as a whole recorded revenues of €2.2bn in the year ending February 2020.

The transaction is subject to approval by the boards and relevant antitrust authorities.

Notable UK courier company deals

Deal name PE backer Deal date Deal value (£m) Exit status
Panther Logistics LDC 2016 17.00 Currently Held
Dalepak Sovereign Capital 2016 n/d( < 25m) Currently Held
CitySprint LDC 2016 175.00 Currently Held
Addison Lee Carlyle Group 2013 300.00 Realised
City Link Better Capital 2013 40.00 Realised
CitySprint Dunedin Capital Partners 2010 n/d(50-100m) Realised

Source: Unquote Data

Company
Founded in 1972 in Hamburg, Hermes is a parcel delivery company. It expanded to the UK in 2000 and has its UK headquarters in Morley. 

Hermes UK generated revenues of £860m in the year ending February 2020, and, according to Debtwire, has EBITDA of around £80m. 

People
Hermes UK – Martijn de Lange (CEO).
Advent International – Ranjan Sen (managing partner).

Advisers
Equity – Goetzpartners (corporate finance); Goldman Sachs (corporate finance); UBS (corporate finance); Kirkland & Ellis (legal).
Company – EY Law (legal); Milbank (legal).

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