British-based private equity investor CVC Capital is buying back a German metering company it sold to rival Charterhouse six years ago, in an unexpected move that highlights the dearth of buyouts in Europe.
CVC already owns 24 per cent of Ista and has agreed to purchase the stake it does not already own in the Essen-based company for the second time in 10 years.
The private equity group decided to table an offer after it emerged in the past week that a competitive auction had almost fizzled out with only one bid being made.
Its offer values Ista at about €3.1bn, including debt. That outstrips a bid led by London-based buyout rival BC Partners, which valued the company at less than €3bn, people familiar with the sale process said.
The deal, Germany’s largest buyout since the nadir of the financial crisis in 2008, would help London-based Charterhouse recoup an investment that it had struggled to generate much interest in among potential buyers.
CVC was initially ready to sell its stake, but first considered entering the fray about two weeks ago. It moved quickly when the auction fell apart late last week after Paris-based Wendel and Axa Private Equity dropped out, leaving BC as the only remaining contender.
Ista is emblematic of so-called secondary buyouts, or “pass the parcel” deals – whereby one private equity group sells an asset to another. This type of deal has grown to make up more than half of all European buyouts.
CVC first bought Ista in 2003, for €930m including debt, from the German utility Eon. In 2007, it sold the company to Charterhouse for €2.4bn including debt, reinvesting some of its proceeds to retain a 24 per cent stake.
Technically, CVC is selling the 24 per cent stake to itself, as it passes from one of its older funds to a newer one. It means CVC will have collected carried interest – the share of profit it receives when selling a stake – on a sale twice.
Typically investors in buyout funds raise eyebrows at those deals, precisely because of the frictions in fees. But in this case, CVC has received a green light from its backers, according to a person close to the group.
Ista operates a network of electricity, gas, water and heat meters, which provide a steady flow of income. It is one of the largest metering companies in Germany with about a quarter of the market, and could be used as a platform to acquire smaller operators.
“We have been successfully invested in Ista for the last ten years and look forward to maintaining our relationship with the company as it continues to implement its growth strategy in the years ahead,” Marc Strobel, partner at CVC, said in a statement.
“Ista does not only have an excellent position with outstanding growth prospects in the field of energy efficiency but also has a very experienced management team and highly dedicated employees.”
Additional reporting by Anousha Sakoui
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