Morgan Grenfell Development Capital (MGDC), the private equity arm of Deutsche Bank, in mid-October exchanged contracts with Hoechst to acquire the German corporation’s Vianova Resins subsidiary in a buyout that will involve some DM900 million (ecu 457 million) in total funding.
The transaction constitutes a high-profile German debut for MGDC. Deutsche Bank used to handle unquoted investments in its domestic market directly. Following a restructuring programme earlier this year that saw MGDC transferred to Deutsche’s asset management division, MGDC’s remit was expanded to cover private equity investment in Germany, as well as the rest of Western Europe. Expansion within Germany and the German-speaking markets will be one of MGDC’s priorities during the lifetime of its next fund, which will be launched before the end of the year (story, page 3).
Hoechst in 1995 grouped its international synthetic resins activities together to form Vianova Resins, an discrete legal entity. Headquartered in Mainz-Kastel, Vianova has subsidiaries in Austria, Belgium, Denmark, France, the UK, Greece, Italy Portugal and Spain and affiliates in Canada, Brazil, Thailand and the US.
The company operates in four product areas – liquid coating resins, powder coating resins, technical resins and printing ink and phenolic resins – and has annual sales totalling around DM900 million. Tom Leader of MGDC, who will join Vianova’s supervisory board, said the company had improved its performance “significantly” in the three years following its regrouping.
Graham Hutton, head of private equity at Deutsche Bank, said MGDC intends to grow Vianova through acquisition, as well as organically, over the next five years and has made provision for this in the financing structure.
The exact acquisition consideration for the business has not been disclosed. The existing management team, led by president and CEO Dr Helmut Strametz, will have “the usual equity percentage” in Vianova following the buyout, Graham Hutton said, declining to specify further.
Graham Hutton revealed that the funding package included DM450 million of senior debt, DM85 million of mezzanine and a DM80 million revolving credit facility, all of which were underwritten by BT Alex.Brown International.
The equity component of the transaction was split roughly 50/50 between the GBP350 million (ecu 500 million) Morgan Grenfell Equity Partners Fund and a direct investment from Deutsche Bank. Deutsche Bank’s investment, however, is effectively a bridge facility, and its direct holding will be transferred into MGDC’s next fund. Graham Hutton said MGDC might sell down a portion of the Morgan Grenfell Equity Partners’ stake to participants in that fund.
The Vianova buyout – part of Hoechst’s ongoing divestment programme to refocus on its life sciences businesses – is expected to complete in November.