KKR & Co. LP (Assets Under Management: US$83.5bn as of June 30th 2013)
Melrose PLC (Market Cap: US$5.95bn as of October 10th 2013)
On October 10th KKR & Co. L.P. announced the acquisition of The Crosby Group and Acco Material Handling Solutions from Melrose Industries PLC in a deal valued at US$1.01bn.
Melrose, a London-based turnaround investment group, buys firms, replaces their management, heavily invests in them and exits by selling back the company to industry leaders or larger investment firms who usually take a more strategic position in the industry. Melrose acquired Crosby in 2008 as part of the US$1.6bn takeover of FKI Plc. Upon announcement that it wanted to dispose of Crosby in July Melrose received bids from Warburg Pincus LLC and CCMP Capital LP as well as industry firms such as Columbus McKinnon Corp.
Crosby is a global provider of lifting and rigging applications across the oil and gas, construction, mining and industrial sectors while Acco is a provider of custom-built specialty material handling equipment, including a full line of hoists, industrial cranes, monorails, carts and trailers.
For the year ended December 31st 2012, Crosby recorded sales of US$405.8M, operating profit of US$94.1M and EBITDA of US$100.9M. The transaction corresponds to an EV/EBITDA of approximately 10x, exceeding RBC analysts’ estimates and allowing Melrose to earn a 3x return on its investment in Crosby. This is the second important disposal for Melrose for this year after the sale of its generators and electric motors unit Marelli Motors to the Carlyle Group LP for US$287M.
The deal is to be completed by the end of 2013 and is going to be an all-cash transaction. Financing will be provided by Morgan Stanley, UBS Investment Bank, and KKR Capital Markets. The transaction is however conditional upon anti-trust clearances in the USA.
As from KKR’s point of view, the acquisition of Crosby and Acco is the last of the numerous carried out by the US-based PE firm after the US$200M investment in the Malaysian Weststar Aviation Services and of the US$550M investment in the largest Chinese refrigerator maker, Qingdao Haier. According to Pete Stavros, the KKR Head of the Industrials investing team, the transaction is strategic for KKR as synergies are expected to occur between Crosby, Acco and KKR’s Capital Safety, a UK-based maker of safety harnesses that uses the same type of distribution channels as Crosby.
Melrose’s share price rose +1.40% on Thursday 10th to £294.17p while KKR’s share price recorded an increase of +2.36% to US$20.41.
KKR was advised by Rothschild and Simmons & Co International, Morgan Stanley, UBS Investment Bank, and RBC Capital Markets while Melrose was advised by JP. Morgan Chase.