The GBP174 million (ecu 262 million) buyout of Target Express Parcels, the first deal from Legal & General Ventures 1998 Private Equity Fund LP (story, page 6) was announced in early February. The deal enables Target’s three founder shareholders to realise part of their holding in the rapidly growing company while reinvesting in the newco on equal terms with LGV.
Target was established in 1983 and now operates from 39 depots in Great Britain and Ireland, generating adjusted operating profits of GBP15 million on sales of GBP75 million in the year to October 1997. Though Target’s growth to date has been based largely on its domestic parcel delivery service, the company also offers international mail and parcel deliveries via a network of overseas partners. It is now experiencing growth across all segments of its business in line with increasing market demand in the rapidly developing express delivery sector.
Paul Murray, former managing director of Federal Express UK, who has joined Target as chief executive, heads a management team which expects to take Target to the stock market within three years.
The funding package for the deal comprised GBP62.6 million of equity, GBP14.4 million of mezzanine and GBP97 million of senior debt. LGV, through its 1998 fund, and the vendors invested equal amounts of equity for holdings of approximately 45% each. The mezzanine tranche was also split 50:50 between the selling shareholders and two LGV-managed funds, Mithras Investment Trust and Group Trust; the equity component of the mezzanine instrument was subscribed up front. Management holds the balance of the equity. The Fuji Bank arranged senior debt facilities together with co-arranger Bank of Scotland.
Target co-founder Ray Griffiths represents the three vendors on the board, alongside Adrian Johnson and Ivan Heywood of LGV. A non-executive chairman will be appointed shortly. Commenting on the deal, Adrian Johnson said “the Target growth story is one of the best we have seen, and we believe the business will continue its impressive growth”.