Alchemy’s US Buy Forms $770 Million Group

Alchemy Partners, which has deployed capital at a phenomenal rate since its creation less than two years ago, in October completed its largest deal with the acquisition of Envirotest Systems, a listed US vehicle emissions testing group in a transaction valued at $770 million (ecu 648 million).

Envirotest will be grouped with ESP, the US operation of Wellman, which Alchemy backed in a public-to-private buyout at the end of last year.

The acquisition was effected through Stone Rivet, a vehicle formed for the purpose, which offered $17.25 a share for Envirotest, valuing the company at $226 million. The transaction involves retiring $420 million of debt in Envirotest and ESP. Alchemy invested $69 million of equity alongside an $11 million co-investment from Chase Capital Partners, a participant in Alchemy’s Investment Programme. Donaldson Lufkin & Jenrette and Credit Suisse First Boston are each providing $100 million of mezzanine funding and are jointly underwriting $396 million of senior loans. ESP and Envirotest together contributed $93 million in cash to the funding structure.

The Envirotest deal was a case of “third time lucky” for Alchemy, which had originally hoped to fund the acquisition with a high-yield bond, before that market dried up. A second deal structure employing conventional mezzanine was abandoned earlier this autumn.