Intertek Testing Services’ listing on the London Stock Exchange brings Charterhouse Development Capital a successful realisation of its 1996 investment. Charterhouse bought the company from distribution group Inchcape in a £380 million management buyout. The original deal was financed with £90 million in equity and £50 million of PIK, while Bankers Trust underwrote £125 million senior debt and high yield bonds to the value of £125 million.
The offer price of 400 pence gave Intertek a market capitalisation of £614 million. Although the price was at the bottom of the range, priced by Schroder Salomon Smith Barney and Goldman Sachs, shares have been trading at around 437 pence. Simon Drury, a director of Charterhouse and non-executive director of Intertek, said: “Obviously we would have liked to get it away at a higher price but it’s a difficult market. The buyers are aggressive and they can afford to be choosy.”
Through the offering Charterhouse has reduced its stake in Intertek from 84 per cent to between 30 and 25 per cent. The firm is subject to a nine-month lock-up before it can sell any of its remaining shares. Drury said the return on investment was between 1.9 and 2.4 times money at the listing and 3.3 times money on cash and the residual stake. Intertek has a ten-year record of organic growth. The company, which provides testing, inspection and certification services covering consumer goods, petroleum and chemicals, electrical products, building products and some agricultural produce, will use the £245 million in proceeds to redeem its preference shares and repay a portion of its debt. At the time of the buyout the management purchased a 16 per cent stake in the company, including 4 per cent held by CEO Richard Nelson. This stake has reportedly been reduced to 7 per cent. Nelson is locked-in to his 2.5 per cent stake for 12 months.