Cinven backs BP buyout

Cinven announced it is set to acquire two divisions from Burmah Castrol, a BP subsidiary, in a GBP204 million transaction. The metallurgical chemicals and releasants operations comprise a number of businesses in the US, UK and Germany. The management buyout, expected to complete in the third quarter, will be financed by equity provided by Cinven and the management team and debt supplied by the Royal Bank of Scotland and JP Morgan. The acquisition will be made through a newco, Foseco.

The two divisions include Foseco Foundry and Foseco Steel, which supply technical products and service solutions to the international foundry and steel making industries. Also included are Remet, a supplier of products to the casting industry, Chem-Trend, a manufacturer of mould and die-cast release agents and Fosbel, a 50:50 joint venture with Glaverbel, which provides services to coke and glass furnace operators. In 2000 the companies consolidated turnover (not including the joint venture) was GBP425 million, more than half of which was generated by Foseco Foundry. The group employs 1,390 people in Europe and 1,471 in the Americas.

Cinven plans to provide Foseco with resources, both financial and strategic, which will enable it to grow organically and through acquisitions. The investor reports that the businesses have leading technology and strong cash flows and, given the right support, will be able to develop. Investment director at Cinven, David Barker, said: “We are pleased to have backed this MBO. The businesses enjoy market leading positions for many of their products and represent a good growth opportunity for Cinven.” Jamie Pike, former chief executive of Burmah Castrol, is CEO designate of Foseco. Cinven will appoint a chairman.

Last March BP announced an offer to acquire Burmah Castrol, the offer valued the company at around GBP3 billion. BP made its intention to dispose of Burmah Castrol’s speciality chemicals business clear from the outset. Credit Suisse First Boston advised BP on the sale of the Foseco businesses.

Also this month NMB-Heller braved an investment in the UK’s struggling steel sector. The investor backed a GBP2 million management buy-in of the open die forging division of Doncasters. Commenting on his search for a financial backer, Martin Burnham, who led the MBI, said: “Many (financiers) looked at the headline news and didn’t recognise that there are extremely buoyant, profitable, small and medium sized specialist players who have the potential to thrive in the global steel market.”