02 August 2011

German M&A heats up

Germany’s largest steel manufacturer ThyssenKrupp may have announced the highest value deal in July, unveiling plans to launch a share sale worth an estimated EUR 1,730 million in the equity markets in order to pay down debt, but the largest M&A deal targeting a Germany-based company involved RWE dumping a majority stake in its local power network subsidiary Amprion.

In the middle of July the utility revealed it is selling a 75 per cent interest in its transmission systems operator to a domestic consortium of institutional investors, comprising insurance companies and special pension fund, for an enterprise value of around EUR 1,300 million, representing around eight times recurrent earnings before interest, taxes, depreciation and amortisation. Under the agreement, which is expected to close in Q3 2011, RWE would retain a quarter of Amprion’s equity capital.

While this transaction involved domestic bidders, there were a number of announced high value acquisitions in July which involved outside players. US private equity powerhouse Blackstone is snapping up Idstein-headquartered outdoor clothing, footwear and equipment manufacturer Jack Wolfskin for an estimated EUR 700.00 million in a secondary buyout which provides an exit for Barclays Private Equity and Quadriga Capital.

The target has passed through the hands of several companies in its time; in 2002 Bain Capital bought the apparel firm from Johnson Outdoors, a US outdoor clothing manufacturer, for EUR 64.00 million. Three years later the private equity player decided to make a return on its investment, selling it to management in a deal backed by Quadriga Capital and Barclays Private Equity for USD 120.00 million. M Cap Finance provided mezzanine funding. In September 2006 Jack Wolfskin completed a debt recapitalisation which enabled Barclays’s buyout arm to realise what it called a substantial portion of its backing while retaining its equity stake.

Another USD 700 million acquisition was unveiled in July; OM Group of the US announced plans to take over Vacuumschmelze in a bid to expand its portfolio in the advanced materials and speciality magnetics sector – ramping up efforts to move closer to users in stable and fast-growing markets, particularly alternative energy where the billion-dollar-turnover manufacturer already has a presence in the photovoltaic materials and chemicals industry. It is worth noting the deal involves yet another private equity firm cashing in on its investment – One Equity Partners is selling up and moving out of Vacuumschmelze.

Germany-based targets did not only pique the attention of US-based bidders in July: GKN of the UK is buying privately-owned industrial power management components manufacturer Stromag for EUR 195 million and Swiss global healthcare giant Roche Holding has inked an agreement to pay out around EUR 190 million for pharmaceuticals research and development services provider mtm Laboratories. Other suitors included Graincorp of Australia, SQI Diagnostics of Canada and Indian automotive component manufacturer Motherson Sumi Systems are just a few that spring to mind.

For those readers interested in figures, the volume and value of announced deals in July involving a Germany-based target rose to 102 transactions worth a combined EUR 6,707 million from 100 valued at EUR 2,350 million in June. In a year-on-year comparison volume was up 23 per cent from 83 transactions while value was almost five times higher than the EUR 1,394 million recorded for July 2010.

© Zephyr