Legal & General Ventures (LGV) of the UK has announced the acquisition of Germany’s Emtec, the world’s largest manufacturer of magnetic tape, in a transaction with a gross value of some DM 530 million (ecu 270 million).
Formerly owned by the German conglomerate BASF, Emtec was acquired by Korea’s Kahap group in early 1997. Although Kahap was pleased with the acquisition, like many other Asian groups, the firm was forced by the ongoing Asian economic crisis to dispose of some of its foreign assets.
Emtec manufactures coated magnetic tapes used for audio, video and data storage, serving the consumer, professional audio and video and computer data storage markets. The company operates two manufacturing sites in Germany and one each in France and Brazil; the majority of Emtec’s sales, currently around DM 1.7 billion per annum, are made in the European Union, but the group also has a strong position in the US and Latin American markets.
LGV paid a cash price of DM250 million for Emtec, excluding two elements of deferred consideration. The private equity firm provided institutional equity of DM95 million from LGV’s 1998 annual partnership fund. Emtec’s management invested for a 7% equity stake. Deutsche Bank provided around DM 150 million in new senior debt to support the acquisition. Two deferred consideration elements, which will be triggered by an exit ratchet, together with existing inter-company loans, account for the balance of the DM530 million gross transaction value.
LGV plans to prepare Emtec for a flotation in the medium term. The company expects to maintain or increase its current position in the mature consumer audio and video sectors while benefiting from rapid growth in sales of products for industrial data storage applications. Alex Insam of LGV’s German team said Emtec could also form an acquisition platform: while the worldwide market for magnetic tape is dominated by a handful of large companies, opportunities for consolidation exist among second-tier and specialised operators.
Emtec is the first German buyout completed by LGV since the acquisition of Tally from Mannesman in 1996; last autumn, the group notched up its first Swiss deal, acquiring the Burkhalter heating maintenance group, which recently secured a leading position it its domestic market via the acquisition of Unitec.