Advent International goes nuclear

Advent International, the US-based buyout firm, has agreed to buy RWE Solutions Group, a portfolio of energy companies including SAG and Nukem from German utility RWE.

RWE is now concentrating on energy production and distribution and is also selling off its water assets in the UK (Thames Water) and the US.

Advent’s purchase includes SAG, Nukem, RWE Industrie-Lösungen, RWE Space Solar Power and Lahmeyer International, which employ about 9,500 staff and had net sales of €1.7bn (US$2.17bn) in 2005.

Advent is understood to be paying more than €100m in cash to RWE but is also taking on the subsidiaries’ unfunded pension obligations that run into a few hundred millions of euros. There is no debt being arranged for Advent, however, as the money is coming as equity from its funds.

Jan Janshen, managing director at Advent’s Frankfurt office, declined to comment on the price but said the deal was attractive because the portfolio of companies being acquired had not been developed optimally by the seller as they had been non-core.

As a result, he said, Advent would be able to speed up decision-making and provide better incentives for the companies to improve their cashflow generation and expand internationally.

SAG is the largest company among the assets being acquired and provides energy-related infrastructure services, such as for high voltage transmission lines and to substations operators It had sales of €1bn last year.

Michael Stadler, chairman of the SAG’s management board, said: “This newly gained independence gives us the chance to penetrate deeper into markets that were hitherto underdeveloped from a turnover perspective. That, together with the discernible increase in investment in the energy infrastructure sector, pre-empt excellent prospects for healthy growth.”

Janshen added that utilities had cut annual capital expenditure from €3.7bn in 1995 to €1.7bn in 2003 after the energy sector had been deregulated but were now forecast to increase this to €3bn per year by 2010.

Nukem works on nuclear fuel cycle and decommissioning services in the UK, Germany and Eastern European decommissioning markets and is the world’s largest independent uranium trader.

Erwin Wehner, chairman of the management board of Nukem, said: “Advent’s way into our company will strengthen our leading position in the nuclear fuel cycle market and will enable us to continue our successful activities in the international decommissioning and waste treatment markets.”

Janshen added: “Nukem is operating in a very hot market as uranium prices have trebled in the last two years as demand has increased and an estimated 200 power plants are being built.”

This demand would boost Nukem’s trading arm, Janshen said, while the waste management and decommissioning operation was seeing plenty of interest from governments with elderly plants in the UK and Eastern Europe.

Advent’s financial adviser on the deal was Rothschild, which also advised on BNFL’s recent sale of nuclear power contractor Westinghouse to Japan’s Toshiba for US$5.4bn, Deloitte and Freshfields. Advent’s main rivals for the deal were Carlyle and DBAG.

In the last two years, Advent has made eight investments including Casa Reha, a private nursing home group; stationery company Herlitz; Synventive Molding Solutions, a global designer and manufacturer of hot runner systems; plastics maker HT Troplast; and Sportfive, Europe’s leading sports rights agency.