CBPE sells water business to SWF

Close Brothers Private Equity (CBPE) has recouped 3.5x its investment in BWA Water Additives through a sale to United International Bank, the sovereign wealth fund of Bahrain.

Manchester, UK and Atlanta, US-headquartered BWA develops and sells speciality branded chemicals for the water treatment market. Having grown revenues from US$90m to US$120m since acquiring the business in May 2006, CBPE decide to start marketing it earlier this year.

“It seemed like a good point in terms of where we’d got to with BWA’s growth and we’d had a lot of approaches for the business,” said Mathew Hutchinson who co-led the deal for CBPE with Iain Slater.

“As we’d only owned the business for two years it made it an easier decision for us. If we hadn’t had the right level of interest we would have kept the business and invested in it ourselves to take it to the next level of growth,” he added.

There was substantial trade and financial interest in the deal in part thanks to the resilient growth characteristics of the three main areas the company serves – desalination, industrial water treatment and secondary oil recovery in oil fields.

“UIB brought something new to the table as an acquirer – a significant proportion of BWA’s business is selling to Middle Eastern thermal desalination plants so it seemed like a good fit,” explained Hutchinson.

UIB funded the acquisition with a Sharia-compliant finance package supplied by Royal Bank of Scotland, HSBC and Royal Bank of Scotland Equity Fund.

The chemicals sector has proved fruitful for CBPE. Past deals include selling mining chemicals maker Minova for £357m in 2006, an exit which generated a 17x return for the firm.

On the acquisition-side, CBPE bought specialty chemical manufacturer Warwick International for £129m from US parent Sequa Corporation at the beginning of September.

“We have a good track record in the chemicals sector,” commented Hutchinson, “As was the case with BWA, many of our previous successful investments in this sector have seen us spinout well-invested non-core assets from large corporates.”

Hutchinson’s outlook is of quieter times to come: “The wider private equity industry is likely to be quiet for the remainder of 2008 and in the case of the banking market it is likely we will not see normality return for at least 12 months,” he said.

In addition to Warwick International, CBPE also acquired offshore oil and gas crane services provider Energy Cranes in March 2008 for £142m.

“Although bank funding is tightening in terms of both pricing and quantum I believe the lending is still there for the right businesses,” he added.