Exits – NWEP exits four UK deals

Newly independent NatWest Equity Partners (NWEP) has enjoyed a raft of realisations from its UK portfolio during the past few weeks as the market waits to discover who the buyer or buyers of its former parent’s portfolio of private equity assets will be.

The first deal announced by NWEP was Alphameric’s GBP60 million ($95 million) acquisition of Pennine Retail Systems, the Stockport-based supplier of integrated business solutions for non-food retailers. The deal gives Alphameric, an IT group specialising in business communication and retail solutions, the opportunity to combine its own in-store electronic point of sale solutions with Pennine’s central management systems. NWEP’s Manchester office led a GBP20 million buyout/buy-in of Pennine in May last year, investing

GBP11 million from the NWEP European Private Equity Fund. NWEP director Martin Draper comments that the sale to Alphameric represents a natural stage in the company’s development, adding that the transaction also demonstrates NWEP’s ability to deliver a good return to investors.

A few days after the Pennine deal, Dynamic Details Incorporated (DDi) announced that its parent, DDi Corp, had signed an agreement to acquire MCM Electronics for a total purchase consideration of around $86 million (1.1 million), to be satisfied with DDi common stock.

MCM was formed through the public-to-private buyout of Symonds in 1999. The company provides fast-turnaround printed circuit board prototype services and high density interconnect products to leading original equipment manufacturers including Alcatel, Raychem, Rotork Controls and Soundcraft/BSS. Tewkesbury-based MCM, which employs around 500 people, reported revenue of approximately $58 million from continuing operations during 1999.

MCM’s acquirer is a leading provider of time-critical, technologically advanced design, development and manufacturing services. DDi Corp chairman Charles Dimick says MCM Electronics will be an important component of DDi’s international expansion programme: “While instantly enhancing our presence in European markets – where we already have a growing customer base – the acquisition also complements our US operations very well”. Martin Malone, MCM’s chief executive, believes that partnership with DDi will enable his firm to achieve its stated objective of becoming the first choice supplier for leading-edge time-critical prototyping services in Europe.

NWEP director Kevin Reynolds, who led the original buyout of MCIC says: “Whilst NatWest Equity Partners normally takes a longer-term view on its investments, the approach from DDi was attractive to all parties. We have demonstrated our commitment to the enlarged business by reinvesting a significant proportion of our sales proceeds.

NWEP announced the third in the series of realisations in April, when Honeywell Thermal Systems acquired Birmingham-based heat exchange technology specialist Serck Heat Transfer for an undisclosed sum.

Serck Heat Transfer, which will be renamed Honeywell-Serck Thermal Systems, was the subject of a GBP36 million NWEP-backed buyout from BTR in 1997. According to NWEP director Neil Broekhuizen, NWEP’s backing enabled the company to reverse the long period of under-investment it had suffered prior to the buyout and, as a result, to establish a world-leading position in exhaust gas cooling (EGC) technology.

Ian Dugan, managing director of Honeywell-Serck Thermal Systems, says the deal will enable the new company to offer customers more complete systems and solutions: “The combination of Serck’s ECG technology with Honeywell’s leadership in turbo charging and exhaust gas recirculation (EGR) will give us a total EGR capability and extensive engine test facilities unrivalled anywhere in the world”.

“We are delighted with the deal: it positions a Birmingham-based operation as a world-class company, as well as providing a healthy return for our investors,” adds Broekhuizen.

Immediately following the sale of Serck, NWEP also announced that it had sold Datel Ferranti Group (Datel) to Ultra Electronics Holdings for GBP44.1 million. Datel is a leading supplier of software and system integration services to the defence and airport industries, supplying defence clients such as British Aerospace and the Ministry of Defence and providing databases and flight information systems for major airports including Manchester, Hong Kong, San Francisco and Toronto. Ultra Electronic, meanwhile, has more than 45 years’ experience in the design and manufacture of technically advanced products for civil and military applications.

NWEP acquired its stake in Datel in July 1998, investing GBP6.95 million in a GBP22 million buyout/buy-in. The Ultra Electronics deal, which NWEP says produced excellent results’ was the second substantial exit for the private equity group’s Manchester office within a month.