Clairfield Review Q2 08 - Syncap

Second quarter 2008
CLAIRFIELD REVIEW
A publication of Clairfield Partners: leaders in mid-market M&A and corporate finance in Europe, the USA, and Australia
Clairfield UK sees silver lining
Mid-market M&A remains unscathed by recent upheavals in credit markets
Albert Ganyushin
Andrew Taee
It is said that economists have predicted nine of
the past five recessions. The UK market seems particularly
open to diverse interpretations. UK banks
have fared better than their US counterparts in the
recent write downs. The 2007 earnings for most
British banks are similar to their 2006 earnings.
However, the banks’ low share prices tell a different
story about investor confidence.
First quarter M&A figures for the UK reflect
pessimism in the financial markets. Announced
deals with UK targets numbered 649 in the first
quarter of 2008, the lowest opening quarter volume
since the first quarter of 2003. The announced
value of UK-target transactions also decreased,
from over 89 billion dollars in the first quarter of
2007 to 50 billion dollars for the same period in
2008, a drop of 44 percent.
The good news is that M&A in the mid-market has
remained relatively unscathed by the recent turmoil.
Albert Ganyushin, managing director at Carlton,
Clairfield’s UK partner, says such deals are not
exposed to financing markets to the degree that
multibillion dollar deals are. He expects the UK
1,000
900
800
700
600
500
400
300
200
100
0
Number of mid-market deals in the UK, 2005-2008
1Q05 2Q05 3Q05 4Q05 1Q06 Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08
Total number of deals Undisclosed value or under $500 million
Source: Thomson Financial
mid-market to maintain a steady transaction volume,
especially as private equity lowers its sights
and turns its attention to attractive mid-market
companies.
Cross-border business is having an increasing impact
on UK M&A activity. The low dollar makes the
United States especially attractive for UK buyers
looking to invest abroad. Carlton has worked on
behalf of several UK clients who made acquisitions
in the United States, including business services giant
Rentokil Initial’s acquisition of Ehrlich Inc, a
Pennsylvania-based pest control company. Fenner,
a polymers producer based in Yorkshire, completed
the acquisition of Pennsylvania-based Prodesco in
January 2008. The investments also flow the other
way, as the US corporations often see the UK as
a platform for business expansion in Europe. In a
transaction of this kind, Carlton advised Spectris
plc on its disposal of Spectrum Inspection Systems
to Illinois Tool Works Inc. Further abroad, Carlton
completed an equity placement and launch of a
corporate finance fund focused on Greater China
for Somerley, a leading Hong Kong and PRC investment
bank in December of 2007.
In a busy first quarter, Carlton has also been involved
in providing capital structure advice and
arranging a new debt facility of £300 million
for Benfield Group Limited. Benfield is a leading
global provider of insurance and reinsurance
intermediary, risk advisory and related
services. The company is listed on the London
Stock Exchange and has a market capitalization
of approximately £600 million.
“The present economic conditions are having
some ripple effects on mid-market M&A,”
says Andrew Taee, CEO of Carlton. “Credit is
tighter and all parties must be more realistic
going into the acquisition process. However,
even with these difficulties, our deal flow continues
with little interruption. We continue to
see opportunities for our clients, and for us.”
UK transaction spotlight: Carlton client Fenner makes acquisition in the USA
Fenner plc acquired Prodesco Inc. for up to $65 million. Fenner plc is a global leader in reinforced polymer
technology. It is the number one producer of heavyweight conveyor belts in the world in addition
to manufacturing specialized polymer products. Based in Pennsylvania, Prodesco designs, develops and
manufactures technical fabrics that are used by industrial, aerospace, and chemical equipment OEMs.
Secant Medical, Prodesco’s wholly owned subsidiary, develops and manufactures specialized textile structures
for the growing medical device market. Clairfield Partners in London and New York originated the
transaction and acted as the exclusive financial advisor to Fenner plc.

NEWS BRIEFS
Partner at Clairfield Spain lectures on crossborder acquisitions
Brian O’Hare
Clairfield Partners Australia issues independent expert report
on the Resource Pacific/Xstrata megadeal
Victor Rudenno
Brian O’Hare, founder and partner of Coram Clairfield
in Barcelona, gave a seminar on international
aspects of crossborder acquisitions on April 11th.
The seminar forms part of the course Company Acquisitions:
A Complete Vision, offered under the
auspices of the Executive Education program of
Barcelona’s Pompeu Fabra University.
Mr. O’Hare sits on the academic committee of the
program, which is geared towards financial or legal
directors and strategic consultants.
The lecture focused on cross-cultural understanding
in the acquisition process, a subject on which
Mr. O’Hare has ample experience. In the last two
years alone, he has overseen five crossborder transactions
involving Spanish companies.
“The students were surprised that crossborder
transactions represent such a large percentage of
worldwide M&A,” says Mr. O’Hare. “The fact is that
50% of the business of Europe’s 100 largest com-
Clairfield Partners in Australia, InterFinancial,
recently participated in one of the most talked
about transactions of 2007 — Resource Pacific’s
AU$1 billion (€600 million) takeover bid by Swiss
mining giant Xstrata.
InterFinancial has extensive experience in mining
and resources and had a long relationship with key
executives of Resource Pacific, a coal mining company
based in Sydney.
Victor Rudenno, director of resources at
InterFinancial’s Sydney office, managed the valuation
team.
Resource Pacific owned the Newpac Mine in New
South Wales, an underground coal mine that recently
developed a long wall mining operation. The
mine, where Resource Pacific hoped to ultimately
triple output of semi-coking coal to 8 million tons
per year, is especially valuable now that coal prices
are at record highs. Semi-coking coal is used in
the production of steel.
With such an attractive resource at stake, Resource
Pacific was previously the object of attention with
a takeover bid from New Hope Corp., also located
in Australia.
Xstrata Coal is the world’s largest exporter of
thermal coal and the world’s sixth largest mining
company. Xstrata made an initial bid in December
2007 of AU$963 million, or AU$2.85 per share for
Resource Pacific.
Percent of total deal volume worldwide
panies is outside their country of origin. Although
the world is getting smaller, cultural differences
continue to play a key role in business negotiations.
Understanding and leveraging on these cultural
differences is still oftentimes what makes or breaks
a transaction.”
Crossborder transaction values as percentage of
transaction values worldwide
24%
27%
36%
34% 34%
29%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: Thomson Financial
InterFinancial was engaged to provide an Independent
Experts Report to shareholders with a
valuation to aid in determining whether Xstrata’s
bid price for Resource Pacific was fair and reasonable.
After analyzing the value of Resource Pacific’s
asset portfolio, it was clear that the valuation of
the company was higher than the initial bid price.
Given the uncertainties surrounding many of
the variables that go to estimating the value of
the company, InterFinancial applied a Monte Carlo
simulation to provide a statistical distribution of
likely values.
The shareholders did not accept the initial bid
and Xstrata eventually raised its offer by 12% to
AU$1.08 billion, or AU$3.20 per share. This price
was ultimately accepted by the shareholders and
Xstrata obtained 100% of the company in February
2008.
“Xstrata’s initial offer did not fully reflect the inherent
value of the Newpac mine, which has 252
million tons of coal in reserve, and the potential to
significantly increase production given the available
local infrastructure,” says Dr. Rudenno. “Resource
Pacific also holds a four-million-ton shipping allocation
at Australia’s export terminals. These allocations
are rationed, so Resource Pacific’s quota
is highly desirable to any mining export operation
especially given the planned increase in future export
capacity. It was gratifying that our valuation
played a part in providing shareholders with an
additional AU$119 million (€70 million) in value.”
2 Clairfield Review Q2 08
26%
31%
34%
32%
46%

SynCap
Carlton
Acquisition
UK/Germany
Rentokil Initial
acquired
medentex
Sale
Netherlands/Czech Republic
Sale
Netherlands
Vitae
was sold to
Manpower Inc.
Boer & Croon
Independent Expert Report
Australia
InterFinancial
Rosa Sistemi
was sold to
Aksìa Capital III Fund
K Finance
Vos Logistics
sold
Vos Noord
to
CTP Products
Boer & Croon
Sale
Italy
AU$51 million
for sale of its
Engineering Business
Clairfield Review Q2 08
Rentokil Initial acquired medentex, a German
waste disposal company, for approximately
€12 million. Rentokil Initial plc is
one of the world’s largest business services
companies with annual revenues of £2.2
billion and a market cap of approximately
£1.8 billion. The company has some 70,000
employees providing a range of services in
over 40 countries. medentex GmbH is active
throughout Europe in environmentallyresponsible
and hygienic disposal of waste
materials from dental practices.
Vos Logistics, a Dutch transport and logistics
services company, sold its activities in
the northern part of the Netherlands to
its management. After completion of the
transaction, Vos Noord was renamed De
Vries Transport Group. The buy-out team
was led by Edwin De Vries, managing
director of Vos Noord, and sponsored by
CTP Invest, a Czech commercial property
developer with activities in built-to-lease
property solutions and customized leasing
arrangements.
Vitae, a professional placement company,
was acquired by Manpower, a world leader
in the employment services industry.
Vitae has 10 offices in the Netherlands and
focuses on candidates in specialist fields.
Vitae will initially operate under its own
brand. Manpower, based in the USA, is a
$21 billion company with a network of
4,500 offices in 80 countries. Manpower
Netherlands has 150 offices with 900
consultants.
Rosa Sistemi, a leader in the manufacturing
of precision linear components, was sold to
Aksia Capital III Fund. Rosa Sistemi serves
companies that are active in the machinery
and automation industries. Sales in
2007 were approximately €11 million, with
continuing growth of 20% per year and an
EBITDA of approximately 20%. Aksia Group
is an independent private equity fund
based in Milan, Italy.
CMI, an ASX listed company and leading
supplier of automotive components to
Australian and US automobile companies,
engaged InterFinancial to prepare an Independent
Expert Report in connection with
the proposed sale of the majority of its CMI
engineering division for AU$51 million (€30
million).
SELECTED TRANSACTIONS Q1 08
Acquisition
France/Belgium
Newtec Packaging
acquired all industrial
assets and the business
of FL Systems
intuitu
SynCap
Sale
Netherlands/Belgium
Vos Logistics
sold
Vos Tank Services
to
Begoos BVBA
Boer & Croon
K Finance
Acquisition
Italy
Axa Private Equity
acquired
Idroma
Merger
Spain
DataLogic
merged with
Sistac
Coram Clairfield
K Finance
Sale
Italy
Cape Natixis
sold
Schmid
to
Siparex
Newtec–Alvey, a subsidiary of Newtec
Packaging of France, acquired all industrial
assets and the business of the Belgian
company FL Systems. Newtec Packaging
specializes in filling machines, palletizing
systems, and turnkey continuous materialhandling
equipment with sales of more than
€55 million and 280 employees. FL Systems
develops, designs, and manufactures order
picking and internal goods flows systems
as well as palletizing and depalletizing
systems.
Vos Logistics, a Dutch transport and
logistics services company, sold its tank
service activities to Begoos BVBA. Vos Tank
Services is active in tank cleaning and tank
services for logistic service providers. The
main branch in Pernis, Holland is the largest
tank cleaning site in the Netherlands and
is strategically located in the Rotterdam
harbor area. Begoos BVBA is a Belgian
conglomerate of companies.
AXA Private Equity acquired Idroma, an
industrial holding based in Italy. Idroma
controls Duplomatic Automazione, active
in the manufacturing of turrets for CNC lathes,
and Duplomatic Oleodinamica, active
in the production of valves and hydraulic
components. Its main clients are companies
in the automation industries. Sales in
2007 totalled approximately €42 million.
The acquisition was made by the Italian
team of the Small Cap Buyout unit of the
French AXA Private Equity fund.
Data Logic and Sistac signed a merger
agreement. Datalogic, based in Reus, retails
computers under the trade name “Beep”.
Sistac, based in Alicante, retails computers
under the “PC Box” and “PC Coste” trade
names. The merged company is the leader
in computer specialty stores in Spain with
sales of €260 million and approximately
700 retail stores. The stores will continue
to use their current trade names.
Cape Natixis, the Italian-French private
equity fund, sold Schmid to Siparex Private
Equity. Schmid, based in Milan, creates
and markets fabrics and accessories for
the haute couture footwear sector. Sales
in 2007 reached €17 million. Schmid was
sold for more than €19 million to the Italian
branch of the French private equity fund
Siparex.
3

4
New colleagues
Greg Rudd
Dean Johns
Berend Lockefeer
Melvin Sie
Clairfield Partners in Australia (InterFinancial) has
recently made three new appointments.
Greg Rudd was appointed internal advisor on
government to the Tolhurst Group, the parent
company of InterFinancial. Mr. Rudd was previously
a lobbyist in his own business for 12 years. He was
a senior policy advisor during the Hawke/Keating
administrations in Australia from 1983 to 1996. Mr.
Rudd has strong relationships with all of Australia’s
current federal and state governments. Mr. Rudd
also brings expertise on Malaysia, China, and
Taiwan to Clairfield Partners.
Dean Johns, associate director, has over five
years of experience in various corporate finance
assignments with Ernst & Young Transaction
Advisory Services in Brisbane. Previously Mr. Johns
worked at Ferrier Hodgson. His expertise covers
M&A, valuations, corporate restructuring and
workouts, and investigating accountant reviews.
Berend Lockefeer, director, began his career
in the investment banking industry (currency
and interest rate derivatives) in Europe. At
PricewaterhouseCoopers in Amsterdam, he was
involved in M&A, capital raisings, valuations, and
strategic advisory. In 2000 Mr. Lockefeer moved
to London where he was appointed in an interim
CLAIRFIELD PARTNERS
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intuitucapital
management role in a start-up business. Mr.
Lockefeer moved to Australia in 2001 and consulted
to InterFinancial on a number of transactions
before becoming director.
Melvin Sie has joined Clairfield Partners in the
Netherlands (Boer & Croon) as a business analyst.
Mr. Sie holds a masters in finance & investment
from RSM Erasmus University in Rotterdam and a
masters in international management from ESADE
in Barcelona. Prior to joing Boer & Croon, Mr. Sie
completed an internship at Lazard in Amsterdam.
Silvia Cartaña has rejoined Clairfield Partners
in Spain (Coram Clairfield). Ms. Cartaña formerly
worked as an analyst at Coram. In her new capacity
as office manager, Ms. Cartaña will handle account
management, human resources, and marketing.
Ms. Cartaña has a degree in business administration
from ESADE in Barcelona.
Silke M. Pratnekar has joined Clairfield Partners
in Austria and Central and Eastern Europe (MP
Corporate Finance) as office manager. Ms.
Pratnekar will be responsible for administration
and internal business coordination. Ms. Pratnekar is
studying communications science at the University
of Vienna.
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Clairfield Review Q2 08