Caxton Gives Up Leisure Link –

A profitable exit for Caxton-Iseman Capital and Duke Street Capital also means a new investment for Henderson Private Capital, an affiliate of AMP, one of Australia’s largest financial institutions. New York’s Caxton-Iseman and the U.K.’s Duke Street this month sold their majority stake in Leisure Link, a gaming business, to Henderson for GBP230 million ($333.5 million). With the sale, Caxton-Iseman more than tripled its original equity investment and garnered a 47.5% internal rate of return.

In their fourth deal together, the Caxton-Iseman and Duke Street in 1998 acquired Bass‘s leisure machine management business, which is now Leisure Link, for GBP70 million ($101.5 million). Structured as a management buyout, Caxton-Iseman took 42% of the company, while Duke Street bought 50% and one of its associates acquired 8%. With this transaction, Russell Hoyle, Leisure Link’s chief executive, laid out a plan to achieve certain things, including a sell once the goals were met.

“Having achieved those certain things, we did what we already agreed to do three years ago sell the business,” said Fred Iseman, chairman of Caxton-Iseman.

The achievements, said Iseman, include turning the business from a cost center into a profit center, tripling Ebit and a whole host of acquisitions.

Leisure Link, based in Burton-on-Trent, England, is a leasing and service provider of pay-to-play gaming machines like video games, pool tables and juke boxes to the U.K.’s pub sector. The company made its first acquisition in March 1999 when it bought Stretton Leisure, a similar business, from Greenalls for GBP28.5 million ($41.3 million). Leisure Link later acquired Maygay, a manufacturer of the games. Most recently, in a move that somewhat transformed Leisure Link into a “next generation” business, it acquired stakes in E-Cast, a U.S. provider of content to broadband appliances outside the home, and an equity interest in Lanarena, a networked PC gaming business. With these came the technology and know-how to network the games.

Duke Street and Caxton-Iseman are retaining a 15% combined stake in Leisure Link. Iseman said the company has another period of strong, sharp growth ahead, building machines and rolling them out, that is going to involve a lot of capital expenditure. An IPO might be possible in the next three years.

Duke Street Connection

The Leisure Link deal marked Duke Street and Caxton-Iseman’s fourth time to team up. Edi Truell, president of Duke Street, and Iseman worked together at SG Hambros in the late 1980s. They went their separate ways in the 90s and were put together by mutual friend Michael Sorkin of Hambros to do a deal when their respective firms were still young – they’ve been doing deals together ever since. In fact, Iseman serves on Duke Street’s advisory board. Their past dual investments include Glasses Guides, which was sold to Hicks, Muse, Tate & Furst; Cremascoli Ortho, which was sold to a Warburg Pincus company; and Franklin Hotels.