Lion Citys LBO flag flutters

Private equity firm 3i Asia is selling its 62% stake in Singapore-based Franklin Offshore, a service provider to the offshore and marine sector, while US-based PE fund Platinum Equity is keen to sell the Asian operations of Acument Global Technologies, which makes fastening systems used in a range of industries.

3i’s sale of its stake in Franklin Offshore is at an advanced stage and has already generated strong interest from a handful of private equity firms and trade buyers. Should the deal materialise, it will mark the first LBO from Singapore since October last year, when a US$280m loan backing KKR’s buyout of Singapore-listed Unisteel Technology closed.

Affinity Equity Partners, CVC Asia Pacific, Farallon Capital, Standard Chartered Private Equity and TPG Capital are eyeing Franklin Offshore. Leverage finance bankers expect the sell-down to fetch about US$375m–$450m (US$250m–$300m) representing a multiple of about 7.5–9 times Franklin’s Ebitda, which is estimated to be about S$50m. JP Morgan is sell-side adviser.

Bidders will also have to factor in the S$20m in mezzanine debt provided by UK’s Intermediate Capital Group that funded 3i’s purchase of Franklin Offshore in July 2007.

A debt financing of about S$150m–$200m – or three to four times Ebitda – to back the winning the bidder is expected to emerge. The Singaporean triumvirate of DBS Bank, OCBC and UOB are almost certain to be involved in the debt financing, while others such as HSBC, and French and Japanese lenders are also said to be keen to lend.

3i’s stake sale is not surprising as the PE firm is believed to be deleveraging its balance sheet and cutting costs by shutting offices in Asia. 3i’s investment in Franklin Offshore was its third in the oil and gas sector after Pearl Energy and Salamander. The latter two were listed on the Singapore and London stock exchanges in 2005 and 2006 respectively.

3i is said to have looked at listing Franklin Offshore in Singapore, but the IPO was shelved due to poor market conditions.

Nonetheless, 3i managed to extract some juice out of its investment in Franklin Offshore. In December it completed a leveraged recapitalisation through a US$44m 18-month loan that comes due in December. Three banks joined bookrunner RZB on the deal, which paid a margin of 275bp over Libor.

Meanwhile, the sale of the Asian operations of Acument Global Technologies has also drawn some interest from a couple of private equity. KKR, which in April 2007 acquired MMI Holdings, a Singapore-based manufacturer of disk-drive parts, is said to be a strong frontrunner because Acument will be a nice fit to its portfolio.

In competition is Unitas Capital (formerly CCMP Capital Asia), which boasts an investment team that founded JP Morgan Partners Asia in 1999 before being spun off as CCMP in 2005. CCMP was rebranded as Unitas in January 2009. Unitas focuses on the medium-to-large sized companies in the branded consumer, retail and industrial sectors.

Goldman Sachs is acting as sell-side adviser to Platinum Equity, which acquired Acument from US-based Textron. Acument Asia has operations in Japan, South Korea and Singapore and is said to have Ebitda of about US$50m–$60m annually.