IK SCORES 20% IRR ON ARCA

Industri Kapital made a multiple of 3.2x and an IRR of more than 20% on the sale of Arca Systems to a portfolio company of Stirling Square Capital Partners. IK acquired the Swedish-based provider of products and systems for materials handling in 1998 and is selling the business to Schoeller Wavin Systems for about €190m.

The sale is the result of an auction that began last year. A couple of other private equity firms expressed interest in the business but Schoeller pursued it most avidly because the two are a strategic fit.

“The combination of Arca and Schoeller Wavin is a perfect fit; the companies are very complementary both in terms of products and geography,” said Arca CEO Wiking Henricsson, who will become vice-chairman of the integrated company, Schoeller Arca Systems.

The combined group will be the global leader in plastic returnable packaging for materials handling, with aggregate annual sales of approximately €520m and 1,750 employees. The global market for returnable plastic containers is growing by 4% to 6% per annum, driven by their advantages over traditional alternatives such as wood, steel and cardboard.

Under IK’s ownership, Arca’s sales grew from around €145m like-for-like in 1997 to about €220m in 2004. During that period, the operating margin turned from negative to approximately 7%. This was achieved by product development, increased efficiencies and cost-reductions through restructuring and operational engineering, as well as the divestment or non-core operations.

Arca is predominantly a realisation from IK’s 1997 fund, although there was also an element of investment from the 2000 fund. Stirling Square Capital Partners is a European mid-market firm with US$250m in committed capital from Citigroup.