Cinvens reverse double exit

Melrose, the UK company floated in 2003 with the purpose of acquiring mid-cap industrial manufacturing businesses, is acquiring two companies from private equity investor Cinven in a £429m deal.

After the sale of the two businesses, Dynacast Group and McKechnie Group, Cinven will retain a 16% share in Melrose as part of a reverse exit. The companies are specialists in manufacturing die-cast engineering components and aerospace parts, respectively.

Melrose is buying the businesses with 42m new shares and also cash, of which £200m will be raised through a placing underwritten by Investec, and £2.2m from an open offer.

“Now is the right time to undertake this transaction given the age of the investment, but Cinven has retained a significant stake [in Melrose] in order to benefit from the upside we expect the improving aerospace market to deliver,” said Richard Munton, a partner at Cinven.

Cinven backed the £434m buyout of McKechnie in 2000. Under its ownership, McKechnie has sold off non-core operations and opened new facilities in China. The firm bought Dynacast in 1999.

Melrose was set up in 2003 to acquire underperforming industrial companies. The purchase from Cinven is its first deal since then. David Roper, chief executive, will oversee the acquisitions, with a possibility for bolt-on purchases going forward.

NM Rothschild advised Melrose, which recently posted full-year losses of £4.2m on turnover and cash of £11.7m. Losses included payment of fees for the failed Novar bid.

Robert W Baird and Morgan Stanley advised Cinven. Investec acted as broker to Melrose.