Spain’s Corpfin Capital is trying to make gold out of waste. The firm last month invested EURO71.4 million in platform company Grupo TMA, an industrial waste management firm operating in Cataluna, Spain. Debt financing in the form of a seven-year loan for the transaction was provided by Societe Generale in the amount of EURO38.3 million. Corpfin will take a 55% stake in the company while management will acquire a 45% interest. The company was advised by Translink.
Gorca Garcia, an associate at Corpfin, said the opportunity was brought to the firm’s attention by the sellers. The firm was attracted to the company’s strong cash flow, good growth characteristics and new initiatives, such as landfills.
“The company is growing at around 20% per year, and this growth can continue because the environmental market in Spain is just starting to grow,” said Garcia. “What we have is a company based in Cataluna, the most advanced region in Spain, and it is able to continue this growth in other regions. In the last year, the company has been investing heavily in landfills and once you are able to invest in and develop the land fill, it is basically a predictable stream of cash flow because you will be charging a very nice amount for every ton that you receive on your landfill.”
The company has two operating landfills with a third one close to being open for operations that will support the company’s waste management business. “Once these assets start being profitable, we’ll have a much better company than what we’ve originally acquired,” Garcia said.
Grupo TMA provides waste collection and disposal services to private companies as well as municipal councils. The company is expected to generate revenues of Pta 36 billion for the current fiscal year.
For the long-term, Garcia said the company plans to “slow down” its long-term contract with municipalities because “that area is getting too competitive” and, instead, focus on the more profitable induced waste management. The company has also diversified into other services such as gardening and recycling. “All of those activities will grow as the environmental market continues growing,” said Garcia.
The transaction is a co-investment from Corpfin Capital’s first and second fund. Corpfin Capital was last known to be marketing a EURO125 million ($136 million) private equity fund focusing on Spain, which was more than four times the size of its 1997 predecessor fund.
Going forward, Garcia said the firm will seek to make investments in the automotive supply and industrial industries. “We are quite focused in traditional economy and that’s what we’ve done in the past and will continue to focus on,” he said.
Garcia also mentioned that Corpfin is looking to exit its holding in Isolux, a manufacturer of telecommunications installation and power generation plants, through a public offering. “There is a similar company that went public and has performed very well because of its past performance, and our investment banks are advising us to take this company public,” Garcia said.
Corpfin Capital was founded in 1990 and has focused on Spanish middle-market private equity transactions. Companies in the firm’s current portfolio include Halcon Foods; Isolux; Undesa; Majorica; and Ros Fotocolor.