Buyout Means Exit for Alchemy –

As a result of a secondary MBO backed by Bank of Scotland, Alchemy has realised its investment in Heavy Machinery Group Limited (HM Plant), a leading distributor of excavators and construction equipment in the U.K. The IRR on the investment is 53% with a 1.6 multiple.

Bank of Scotland has provided a GBP36 million package to facilitate the secondary MBO, providing an exit for Alchemy, its 50% shareholders. Alchemy and Bank of Scotland backed HM Plant in December 1999 and invested GBP9.5 million to support management in the buyout of the group. The company repaid GBP3.5 million of loan stock plus interest of GBP0.2 million at the end of last June.

Management approached Alchemy with a proposal in February 2001 to refinance the Group, acquiring Alchemy’s stake and further increasing their ownership of the business. The sale generates a further GBP11.1 million with a deferred payment due on June 30, 2001, of GBP0.5 million.

Bank of Scotland continues to support the business, providing a package comprising institutional loan stock, senior and mezzanine debt, and a working capital facility. Bank of Scotland is also subscribing for a minority stake in the fully diluted equity share capital of the company. Alan Ross and Frank Summers led the deal for the bank.

Ross said of the deal: “Bank of Scotland has already been part of the growth story of HM Plant and we are pleased to strengthen our relationship by backing the management team once more. This is another example of how our integrated finance offering can provide an exit for a private equity fund, while facilitating equity control to a management team.”

HM Group operates from 13 depots around the U.K. and employs around 250 people. For the year ended June 30, 2000, group turnover exceeded GBP90 million.

The group has had long term distribution agreements with Hitachi and Fiat-Hitachi for the sale of tracked excavators in the U.K., in which both companies have a leading share of the market. In addition, HM Group has distribution agreements with Fermec, HAMM and Same Deutz-Fahr, as well as distributing Isuzu diesel engines.

According to Alchemy, it was the right time to divest the business and the company has traded well since the original buyout in what is described as a somewhat old-fashioned market.