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INDUSTRI KAPITAL
:ISSUE NO 4 SUMMER 2002

:IPO MARKETS RETURNING
– and better times ahead for
TO NORMAL public market investors
FEW SECTORS OF INTERNATIONAL finance
have been affected as adversely by the global
economic slowdown, the aftermath of 11
September and the fallout from the collapse of
Enron, the US energy giant, as the market for
new equity issues.
Last year the global IPO market was worth
$85 billion – less than half the $196 billion it
totalled in 2000. This year it is estimated that
volumes will be more in line with 2001 than
with the previous year.
Such arid conditions are detrimental both to
investors and to those companies seeking to
raise new money in the primary equity markets.
Investors need regular opportunities to put
their money into a variety of companies, in a
range of sectors, if they are to adequately spread
their risk. Companies, in turn, need reliable
access to as many sources of capital as possible.
Over the last 12 months, however, conditions
for new issues in the primary equity markets
have been poor, with investor confidence at a
markedly low ebb. Stock markets world-wide
have been effectively closed to all but the most
stunning of debutantes and even these issues
have had to be priced at the low end of
expectations.
With the absence of an IPO route private
equity-backed companies have been turning
to trade sales or secondary buyouts as their
preferred exit routes. Last year IK alone
achieved four healthy realisations via trade sales.
In better days some of these companies might
have listed. Private equity houses are nothing if
not resourceful and will achieve the right exits
for their investments, come what may. But for
public market investors it is a different story and
they have been deprived of what might have
been attractive investment opportunities.
Fortunately the tide seems to be turning and
in the recent period the supply and demand for
capital has begun to swing slowly into balance.
This year has already seen a number of
private equity-backed companies – including
IK’s Alfa Laval, Nobia and Intrum Justitia –
being floated. Although the pricing on some
of these issues has been sensitive, a trail has
been blazed and the backlog of companies that
were stranded on the slip-way last year can now
begin to clear.
However,
there have been
lessons to be
learnt on both
sides. All IPO
participants must be realistic about what they
can achieve from the situation. Institutions
cannot expect IPOs to be discounted to the
extent that companies are significantly undersold.
Vendors and their advisors, in turn, must ensure
that the share price is not so toppish that it sinks
as soon as trading begins. Vendors should also
retain a meaningful portion of shares so as to
demonstrate a vested interest in their company’s
continuing success as a quoted concern.
The last year or so has been a difficult time
for aspirant stock market joinees, their vendors,
sponsors and prospective investors. IPOs are
not for the faint-hearted and will always be
something of an educated gamble. Nevertheless,
a smoothing of the peaks and troughs that have
“After a difficult year for aspirant stock market joinees, their
vendors, sponsors and prospective investors, it seems that supply
and demand for capital has begun to swing slowly into balance.”
come to characterise stock market listing and
investing would be desirable with markets
‘well-functioning’ for a greater part of the
business cycle, rather than in boom times
only. This has, however, become more difficult
with many hedge funds stagging and shorting
new IPOs.
Increased stock market stability would
benefit companies through providing a reliable
means of realising and raising new capital. It
would also enable investors to judge companies
on their individual merits and not see their
market value influenced so unduly by factors
outside their control.
Björn Savén, Chief Executive

:SUCCESSFUL FLOTATION
OF ALFA LAVAL
A text book example of a model
investment for Industri Kapital
LESS THAN TWO YEARS after one of Europe’s
largest LBOs, Alfa Laval has been restructured,
revitalised and floated successfully on the
Stockholm Exchange.
The flotation of Alfa Laval, the Swedish
specialised process engineering company, on the
Stockholm Exchange in May this year, was a
text book example of what has been a model
investment for Industri Kapital.
As one of the best known and most wellrespected
names in the engineering sector, Alfa
Laval has strong technology and a global
presence serving niche markets. The company
has global leading positions in each of its three
main activities – heat transfer, separation and
fluid handling – employs over 9,200 people and
has sales and manufacturing facilities worldwide.
Alfa Laval was founded in 1883 to produce
and sell dairy cream separators. It was listed
for most of its history until 1991 when it was
acquired by the privately owned international
food and packaging group Tetra Pak.
Following the acquisition, the new group’s
organisation was gradually restructured and in
1993 the company took the name Tetra Laval
Group. Tetra Laval set about absorbing Alfa
Laval’s food and agricultural businesses and
disposed of peripheral activities. By 1999,
however, Tetra Laval had decided to refocus
around its core food-related business and Alfa
Laval was put up for sale.
Offers were invited from a number of financial
and trade buyers. Initially Industri Kapital did
not qualify for the second round of the auction
sale. But when other, higher bids began to fall
away IK was re-invited into the auction process.
Its negotiations were successful and on 24
August 2000 IK acquired a 62.2 per cent stake in
Alfa Laval. Tetra Laval retained a minority
interest of 36.8 per cent with management
owning the remaining 1.0 per cent of the equity.
Ingredients for success
“We believe that we valued the company fairly,
but appreciated that despite its relatively modest
profitability it was an absolutely world class
company – technically and in terms of its
customer base. With strong market positions,
FLUID HANDLING. One of
Alfa Laval’s key technologies.
good cash flow and proven international
management Alfa Laval had all the ingredients
for success,” says Christian Salamon, a Director
of IK, who led the transaction team.
With vendor participation a feature in the
majority of its investments, IK was happy for
Tetra Laval to maintain a stake in the company.
“These arrangements usually work well both
ways. We have comfort that the company hasn’t
been ‘dressed-up’ for sale while the vendor
knows that it will share in the company’s upside
and isn’t selling itself short,” says IK Associate
Director Hans-Christian Bødker Jensen.
Jörn Rausing, head of M&A and board
member of Tetra Laval explains that, initially,
maintaining a stake in Alfa Laval was regarded
as something of a contingency plan by Tetra
Laval. “We were not immediately comfortable
with the idea. But when we understood how
clear IK’s objectives were – in terms of staying
true to the bottom line and maximising
profitability, and became attuned to the fact that
our role in the company had shifted from being
a strategic to a financial partner, we saw that it
could work to everyone’s advantage,” he says.
Alfa Laval’s management team, led by
President and Chief Executive Sigge Haraldsson,
was also pleased with the outcome. “From the
outset IK took a dedicated interest in Alfa Laval,
the values inside the company and the potential
for further value creation,” he says. “IK swiftly
aligned its interests with those of the company
and the management team and the relationship
between us all – management, IK, and Tetra
Laval – has always been very positive,”
Haraldsson continues.
“Having now packed a great deal into a short,
and hectic, time-frame, we have lived very close
to some key people at IK and feel we know
them very well. The partnership has been very
strong,” he says.
Classic turn-around material
With its global market leading positions and
financial improvement potential Alfa Laval was
an attractive investment proposition for IK. It
was also well diversified in terms of its customer
base, end-user industries and geographically.
“It was a very stable business with a recognised
global brand name in markets with significant
barriers to entry,” notes Salamon.
With many of Alfa Laval’s products critical
to its customers’ manufacturing processes the
company also has a large base of installed
products producing recurring profitable sales
of parts and services.
Because it enjoyed gross margins of some 35
per cent yet had operating profits which, at 6.5
per cent, were well below the industry average,
Alfa Laval was regarded as classic turn-around
material. “We could see strong potential for
improving the company’s operating efficiency,”
says Hans-Christian Bødker Jensen.
A multi-year restructuring strategy to achieve
this, primarily through reducing Alfa Laval’s cost
base together with the sale of real estate and
under-performing assets was launched. The
results were showing through as early as 2001

A STRATEGIC PARTNERSHIP.
Christian Salamon and Hans-Christian
Bødker Jensen, members of IK's Alfa
Laval team. Sigge Haraldsson, Chief
Executive, Alfa Laval.
with nearly half the SEK 1 billion of savings
annually, which had been targeted for the end
of 2003, being delivered.
Parallel initiatives to enhance top line
growth, continue margin expansion and grow
shareholder value included focusing increasingly
on individual customer segments, expanding
Alfa Laval’s after-market sales of parts and services,
developing new industry applications and
products as well as making add-on acquisitions
and strategic alliances.
Right time to enter next phase
IK’s experience with other companies in its
portfolio in similar circumstances provided
valuable insights here. IK had already employed
a strategy to boost the after-market side of
Finland’s KCI Konecranes, for example. And
Alfa Laval was exposed to several industry
segments, which IK was comfortable with
through previous investments, e.g. the marine
segment through the marine cargo handling
equipment company MacGregor.
“The process to restructure and build a new
company has been huge. But IK was always
growth with ‘liquid currency’ to help fuel that
growth,” Salamon asserts.
In addition, although the restructuring
programme has been a success and resulted in
almost doubled operating profit (adjusted
EBITA) between 1999 and 2001, Alfa Laval was
still not the best in its class – its comparable
peer group having EBITA margins of 14-15 per
cent against Alfa Laval’s 11 per cent EBITA in
2001. “We hadn’t reaped all the benefits of the
improvements ourselves but had left something
on the table for the new investors,” Salamon
explains.
Nervous equity markets
Although Alfa Laval is a global business it was
decided to float the business on the Stockholm
Exchange primarily because the company has
strong brand recognition in Sweden and this is
where it has its roots and had been listed
previously.
Following a ‘beauty parade’, Credit Suisse
First Boston and Enskilda Securities were
appointed in early spring 2002 as joint global coordinators
and book runners
“The last two years has been an interesting and rewarding for the IPO. In addition
Deutsche Bank, Lehman
journey. The fact that we were able to list on the stock
Brothers, ABN AMRO
market after less than two years under new ownership is Rotschild Alfred Berg,
Handelsbanken Securities
the most conclusive evidence of our success.”
and Nordea Securities were
appointed co-lead managers.
extremely supportive of the transformation strategy The lead banks carried out a pre-marketing
and the suggestions and initiatives taken by the exercise among more than 300 institutions to
management team,” says Sigge Haraldsson. get a feeling for the company’s valuation and
Alfa Laval achieved annual net sales of some likely pricing.
SEK 16 billion and EBITA of approximately
However, the primary equity markets were
SEK 1.7 billion in late 2001. With all the
still nervous. A series of other events such as the
cost-saving and value creation initiatives
announcement of an ambitious rights issue by
performing well ahead of plan, an exit strategy the Swedish telecom giant Ericsson, the decision
was formulated.
by LM Glasfiber in Denmark to cancel its
“We had initially put a three to five year time flotation and that by Punch Taverns to postpone
horizon on the investment. This was governed its float in the UK where retail group HMV had
by the time expected for all the restructuring already displayed poor trading performance
changes to be implemented. But since we had post-float, further sapped investor confidence.
already had some very good results coming
“Although there was a lot of investor interest
through relatively early we felt it was a good in Alfa Laval there was also a great deal of
time for Alfa Laval to enter the next phase of its uncertainty in the IPO markets,” says Salamon.
“This uncertainty grew during the book
building process and investors became very
price sensitive,” he says.
Significantly oversubscribed
Having listened to the market, IK decided to
revise the share price downwards and also to sell
fewer shares rather than postpone the float. At
SEK 91 per share, against an earlier indicated
range of SEK 108 to SEK 140, Alfa Laval had
ultimately a market capitalisation just over SEK
10 billion (EUR 1.7 billion).
IK and Tetra Laval retained 27 per cent
and 16 per cent of the newly-listed company,
respectively. Ultimately, however, the share
issue was three-and-a-half times subscribed with
the share price rising by nearly eight per cent on
the first day of trading.
“A stock market listing was always our
preferred exit route and also supported by the
management team. It was a relatively smooth
process and the outcome has been very good,”
continues Salamon.
“The last two years have been an interesting
and rewarding journey and the fact that we were
able to list on the stock market after less than
two years under new ownership is the most
conclusive evidence of our success,” Sigge
Haraldsson concludes.
Operating profit (MSEK)*
2,000
1,500
1,000
500
0
* Adjusted EBITA
6.5%
934
7.7%
11,0%
1,160 1,738
1999 2000 2001
SIGNIFICANT IMPROVEMENT. The
restructuring programme resulted in
almost doubled operating profit between
1999 and 2001.
Operating margin
15%
12%
9%
6%
3%
0%

:PORTFOLIO COMPANY NEWS
SUCCESSFUL IPO OF
INTRUM JUSTITIA
Receivables management service
company Intrum Justitia was
listed on the Stockholm Exchange
on 7 June 2002 following an Initial
Public Offering of shares to the
market. The price was set at SEK
47 per share. As a result, Intrum
Justitia received net proceeds of
SEK 1,350 million. Following the
IPO the Industri Kapital 1997
Fund owns approximately 25 per
cent of the company.
“The great interest shown in
Intrum Justitia during the IPO
process, and the fact that the
offer was subscribed 12 times,
demonstrates great confidence in
the company’s business. The
demand for professional services
NOBIA LISTS ON THE
STOCKHOLM EXCHANGE
The Industri Kapital 1994 Fund
company. We have built a strong
platform from which we expect to
grow further both organically and
EUR 1 billion and some 6,000
employees. The group’s brands
include Poggenpohl, Magnet,
companies driven by the out-
has made a partial exit through
through synergistic acquisitions.
HTH, Marbodal, Norema, Sigdal
sourcing trend has proven high,”
the IPO of Nobia. The offering
The listing provides us with
and Novart.
commented Christian Salamon,
was subscribed approximately
continued strength to do so,”
“It has been an exciting journey
a Director of Industri Kapital.
3 times and the price was set
commented Nobia’s CEO, Fredrik
since 1996 when we founded
Intrum Justitia’s objective
at SEK 78 per share. The new
Cappelen.
Nobia. The business has been
is to be the leading provider of
issue provided Nobia with gross
The Industri Kapital 1994 Fund
radically redefined through
receivables management services
proceeds of approximately
owns approximately 38 per cent
extensive restructuring, brand
in Europe by measurably improving
SEK 546 million. Trading in
of Nobia following the IPO (prior
development, organisational
clients’ cash flow and long-term
Nobia shares on the Stockholm
to any utilisation of the over-
re-engineering and add-on
profitability. The group has a turn-
Exchange commenced on 19
allotment option).
acquisitions. The company is
over of SEK 2.3 billion with more
June 2002.
Nobia is Europe’s leading
well positioned for further growth
than 2,600 employees in 21
“Nobia has developed into
kitchen interiors company with
as a listed company,” comments
European countries.
Europe's largest kitchen interiors
pro forma sales of approximately
IK’s Chief Executive Björn Savén.
:TRANSACTIONS
Ulm, Germany, had sales in
excess of EUR 390 million in 2001
and employs approximately
INDUSTRI KAPITAL ACQUIRED
LABEYRIE GROUP
Industri Kapital has strengthened
support Labeyrie’s strategy of
acquisition-led growth in its main
businesses, both in France and
2,900 people globally.
its position in the French buyout
abroad,” said Christopher Masek,
“We see a great potential for
market through the acquisition of
a Director in IK’s Latin European
the business to grow organically
Labeyrie Group. The company
team. “Together with Labeyrie’s
and through selected additional
was acquired from Groupe Suez
management we aim to further
investments and we are prepared
and through a public offering. This
develop the business, for example
to support Gardena’s strategy to
was IK’s third investment in
through broadening the product
expand in Europe,” said Detlef
France, the two prior transactions
range and creating new
Dinsel, the Director responsible
being Fives-Lille in 2001 and Laho
distribution channels.”
for IK’s German operations.
Equipement in 2000.
Gardena – both a brand and
Labeyrie Group is the
GARDENA ACQUISITION
COMPLETED
The IK 2000 Fund has completed
company name – is inseparably
linked with gardens and gardening.
The company started its
operations in 1961 and is today
European market leader in foie
gras and smoked salmon. All its
products are produced according
to high gastronomical standards
the acquisition of Gardena
active in over 80 countries around
in the southwestern part of
Holding AG from the founding
the world. Gardena offers a
France.
families and through a public
comprehensive range of garden
The company’s turnover for
tender offer.
products including water manage-
the financial year 2000-2001
Gardena is a leading European
ment, garden care as well as
exceeded EUR 200 million and it
garden equipment company. The
pumps and garden decoration
has some 2,500 employees.
group which is headquartered in
throughout the world.
“Industri Kapital intends to

:PERSONNEL
:KNOWLEDGE DEVELOPMENT
NEW RECRUITS
MAY INVESTOR MEETINGS
IK’s New York and London
gatherings are planned
for the London and Hamburg
encounters along the way.
Demonstrating high levels of
investor meetings took place in
investment professionals later
entrepreneurship, good team
Anders Petersson
May and numbered around 90
this year.
spirit and masses of free and
Swedish. Associate,
participants in total. The two
innovative thinking all teams
German team.
meetings had the same agendas.
During March all IK assistants
found their way to the gathering
Based in Hamburg.
Björn Savén kicked off the
gathered together for a day
spot and winners were crowned
meetings with opening remarks
structured around working in
– not all undisputed!
about IK’s organisation and
projects. Practical examples
James Yates
current activities, followed by
were mixed with lectures and
Throughout spring training of staff
British. Manager,
Harvard professor Paul A.
interactive sessions around
on all functions of topIK – the IK
Investment Administration.
Gompers who gave a presentation
different angles of the theme.
Intranet – has continued and
Based in London.
on “The Opportunity for Private
several Super-users of different
Equity in Europe”. The IK
During April the annual IK Spring
modules have been appointed in
Directors thereafter discussed
Summit took place in Divonne,
the different offices to help share
Bruce Costick
recent transactions and portfolio
France starting with workshops
knowledge – knowledge sharing
British. Senior Accountant.
developments. Dag Mejdell, CEO
for all investment professionals
is power bearing!
Based in London.
of Dyno Nobel ASA, rounded off
around three main themes: “Lead
the meetings with an in-depth
sourcing or How do you make the
description of Dyno Nobel and its
cold call and get the meeting”,
Ola Cronholm
activities. Both meetings were
“Price Mechanism or How do you
Swedish. Controller,
followed by dinner.
make sure you actually pay what
Investment Administration.
Based in London.
KNOWLEDGE SHARING IS
POWER BEARING
Knowledge sharing and training
you set out to do” and “Investing
in partnership with Management
– what does it REALLY mean”
Many ideas were exchanged in
Caspar von Meibom
for various groups of IK staff
good spirits, many new thoughts
German. Associate,
continued in different formats
were evoked, tested and filed.
German team.
during spring. The activities started
When the rest of the IK staff
Based in Hamburg.
off in February when the Stockholm
joined the investment teams,
investment professionals were
information on current projects
given a chance to sit down with
was shared. The get-together was
Trygve Grindheim
experts from the legal as well as
rounded off by sending everybody
Norwegian. Has rejoined
audit side to discuss Corporate
trekking into the mountains,
Industri Kapital in London
Governance both in theory and
equipped with list of to dos, to
as Deputy Director.
real life situations. Similar
finds and problem-solving
:WEB LINKS
:CALENDAR
www.alfalaval.com
www.labeyrie.com
DURING SEPTEMBER
IK News
DURING DECEMBER
Annual Update
www.gardena.com
www.industrikapital.com
www.nobia.com
www.stockholmsborsen.se
3 DECEMBER
Annual Investor Meeting
BY END DECEMBER
30 September, 2002 Reports,
Stockholm
including Valuations
www.intrum.com
Advisory Council Meeting
distributed to Investors
Stockholm
www.industrikapital.com
IK News is published three times a year by Industri Kapital Limited, Brettenham House, 5 Lancaster Place, London WC2E 7EN, England.
© 2002 Industri Kapital Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval
system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior
permission of Industri Kapital Limited. Editor: Anne Holm Rannaleet. Assistant editor: Maria Nilsson. Copy: Joanna Gant.
Illustrations: Bo Lundberg/Rithuset. Photographer: Antti Mannermaa. Production: Åkesson & Curry KB, Sveavägen 62, SE-111 34
Stockholm, www.akessoncurry.com.