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BARCLAYS DEAL ADVISOR

Bahrain's Investcorp sells Armacell for $655m

Manama, May 1, 2013

Bahrain-based private equity firm Investcorp has agreed a sale of its German insulation firm Armacell to Charterhouse Capital Partners for over 500 million euros ($655 million).

The sale had stalled earlier this year after bids from Charterhouse and other potential suitors came in below Investcorp's expectations.

But the company has been helped by the dearth of other profitable targets for private equity deals in a moribund European economy, where buyout loan volumes are down around a third on the same time last year.

Charterhouse's acquisition will be backed with debt financing provided by BNP Paribas, Credit Suisse and HSBC acting as joint bookrunners and mandated lead arrangers.

The leveraged loan financing will include senior leveraged loans and second lien debt totalling around 350 million euros or around five times Armacell's earnings before interest, tax, depreciation and amortisation of about 70 million euros.

The financing will be mainly denominated in dollars and marketed to US investors as Armacell has US revenues. The advantage of raising debt in the US is that the deal can be covenant lite - a structure that has fewer financial and maintainance restrictions.

After the sale stalled earlier this year, Investcorp considered alternatives including holding onto Armacell and lined up a dividend recapitalisation, a process that adds debt to a company's existing borrowings and enables a dividend to be taken from it. Four banks committed fully underwritten financing for this and it was a legitimate alternative, bankers said.

However, Charterhouse returned to the table with an offer of over 500 million euros leading Investcorp to discard the dividend recapitalisation and push ahead with the sale.

That points to both the relatively higher faith of private equity investors in Germany than other European markets as well as offering some hope that deals may pick up in Europe, where they are lagging a tripling of volumes in the U.S. this year.

Armacell was bought by Investcorp in 2007 for 400 million euros, backed with around 382.5 million euros of debt, according to Thomson Reuters LPC data. Under Investcorp's ownership Armacell's sales have increased by 30 percent to approximately 430 million euros.

Armacell now operates 19 manufacturing facilities in 13 countries and serves 30 countries around the world. It has over 2,300employees and it says it is the world's largest maker of flexible insulation, claiming 40 percent of the market for products used to lag pipes and ductwork in buildings such as factories and schools.

"The sale of Armacell at a time when the global economy continues its slow recovery is testament to our ability to grow businesses and help them realise their potential," Investcorp Gulf president Mohammed Al Shroogi was quoted as saying in the Gulf Daily News, our sister publication.

"Armacell's diversified revenue was the result of working closely with the management team to develop new strategies and technologies.

"We are proud of Armacell's success to-date and look forward to seeing it continue on the path of success."

Investcorp was advised by Barclays on the transaction. – Reuters and TradeArabia News Service




Tags: Bahrain | Investcorp | London | Germany | Insulation | Armacell |

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