as·si·du·i·ty

In late 1999 Carlyle agreed to buy a 26% stake in the German spark plug specialist BERU AG (‘BERU’) at €30 per share from a group of family shareholders.

This implied an equity valuation of €300m. BERU carried a net cash position of €65m and had €15m of non-operating financial fixed assets bringing enterprise value down to €220m.

This implied the following multiples: 88% of sales for 1999/2000 (€248m), 3.1 times EBITDA for 1999/2000 (€72m, 29% margin) and 3.8 times EBITA for 1999/2000 (€58m, 23.4% margin).

BERU management qualified the intended public offer at €30 a share by Carlyle planned for Feb-00 as too low and initiated a share buy-back program. In Feb-04 Carlyle held 37.1% of Beru’s share capital.

Post script: In Nov-04 U.S. automotive company BorgWarner Inc. announced it had signed a share purchase agreement for 62.21% from major shareholders and a share purchase option agreement for 0.82% of the outstanding shares in BERU. Under the terms of the agreement Carlyle and the family shareholders would receive €59 per share. In addition it announced its decision to make a voluntary public tender offer for the remaining shares for a price of € 67.50 per share. This valued the equity at €621m. Adjusted for BERU’s €80m net cash position and €5.9m in financial fixed assets at 30-Jun-04 this valued the business at approximately €535m. This implied the following multiples for the 12 months ended 30-Jun-04: 144% of sales (€370.6m), 6.5x EBITDA (€82.9m, 22.4% margin), 9.1x EBITA (€58.8m, 15.9% margin) and 2.2x tangible capital employed (€243m).