HgCapital is selling FTE Automotive, the world’s largest manufacturer of automotive clutch and brake actuation systems, to PAI Partners, the Paris-based private equity firm, for €370m.
HgCapital acquired FTE for €180m in December 2002, increasing turnover in the first two years of ownership by 30% to €370m from €286m. It then recruited a new management team, which was followed by investments in China and Brazil and acquisitions in the US and Slovakia.
FTE was recapitalised last September, recouping 1.7x HgCapital’s original investment in the firm and increasing its overall stake in FTE. Completion of the sale to PAI Partners will generate a total capital profit of €145m, 3.7x original cost, and an IRR of 90%.
On completion, HgCapital Trust plc, a quoted investment trust that participates in all of HgCapital’s investments, will realise a total of £14.2m. This is an uplift of £7.1m against the book value at December 31. The estimated impact of the realisation on the net asset value of HgCapital Trust would be 28p per share.
Trevor Bayley, a partner of HgCapital in Germany, said FTE was a good example of the value that private equity can bring to the German economy.
“Under our ownership FTE developed from a domestically-focused, high-quality automotive parts supplier to a true global player serving the needs of its OEM customer base around the world,” he said. “Our initial investment in FTE was completed at a time when a number of our competitors were closing their German operations.”
Craig Donaldson, a London based partner of HgCapital, said that the transaction further validated the private equity model that the firm had constructed since its spin-out from Merrill Lynch in 2000. FTE is HgCapital’s seventh realisation in the last 12 months.