Cork Industries, the company formed through a Candover-backed buy-in of three groups of engineering businesses in July 1996, has completed two further acquisitions. These purchases, of Bird Precision Bellows and Hunt Power Drives, and three acquisitions made by Cork between November 1996 and March 1997, have expanded the group’s portfolio of businesses to 14.
From the outset, Candover planned to use the three core businesses originally acquired by Cork as a platform for a leveraged build-up (LBU), to capitalise on opportunities resulting from the consolidation of the engineering sector. However, equity funding for the two most recent buys came, not from Candover itself, but from Alpinvest Holding of the Netherlands.
There are several reasons for this. Close links exist between Candover and Alpinvest: Alpinvest is an investor in the UK group’s funds, and Candover took a reciprocal shareholding in Alpinvest when it listed last year. Candover’s recently closed 1997 fund is precluded from investing in Cork, a deal that was financed by its predecessor, the 1994 fund, because of valuation issues (though Candover stresses that there is still follow-on capital available for the 1994 fund’s investees). But the chances are that Alpinvest was brought in primarily as a risk-dilution measure, a view borne out by Nigel McCorkell, Cork’s chairman. The Financial Times reported him as saying “In July 1996, neither Marek Gumienny [of Candover] or I knew how quickly this thing would grow. It is unrealistic to expect Candover to put up all the money”.
Alpinvest invested GBP7 million (ecu 10.5 million) in return for a 23% equity stake, and will take a seat on Cork’s board. Debt funding for the acquisitions was provided by Barclays Bank.
Hunt Power Drives and Bird Precision bellows are expected to generate approximately GBP7 million in their first full year as part of the Cork group. Last year, Cork Industries’ three divisions, aerospace, power transmission and specialist engineering, generated PBIT of GBP4 million on combined sales approaching GBP35 million.