3i exits Encon for 5.8x money

Guy
24 October 2005

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3i has sold Encon, one of the UK's leading specialist distributors of insulation products, to Wolseley Plc, the global leader in heating and plumbing supplies and a leading supplier of building materials, in a deal worth £140.5m.

The sale will complete 3i’s exit from the Encon group which it acquired, alongside its management team led by CEO Douglas McKerracher, in late 1997. 3i’s proceeds represent a money multiple of 5.8 times its original investment cost and an IRR of 30%.

Encon, based in Wetherby, West Yorkshire, is the second largest specialist insulation distributor in the UK, supplying insulation, dry wall and related products to the construction industry. Currently the business operates from 22 depots in 18 locations and has a turnover of £170m. The business has grown substantially in recent years, benefiting from market growth led by government legislation and increased demand for basic insulation products.

In 1997, 3i backed a secondary MBO of Encon valuing the company at £35m. At that time the group consisted of two principal businesses; the Encon distribution business and the Superglass insulation manufacturing business. In 2003 Encon contracted to sell Superglass to Knauf Insulation but the transaction was prohibited by the UK Competition Commission. Subsequently, Superglass was sold to NBGI Private Equity in August 2005 for £37.5m. The sale of the Encon distribution business (including its contracting business) for £140.5m brings combined sale proceeds to £178m and represents a complete exit from the group for 3i. During the life of the 8 year investment, 3i has taken an active role in the strategic direction of the business including appointing Jim Cooper as chairman of the board and Ken Beaty, 3i Director, as a non executive director on the board.