In May-96 affiliates Goldman Sachs Capital Partners acquired 68.5% of the common stock of the largest U.S. owner of bowling centers and bowling equipment manufacturer AMF Bowling Worldwide, Inc. (‘AMF’) for approximately US$1.37bn. At the same time The Blackstone Group and Kelso & Company acquired 13% each of the common stock.
This implied the following multiples: 243% of sales for 1995 (US$564m, 2.1x net tangible capital turn), 8.3x EBITDA for 1995 (US$164m, 29.1% margin), 11.0x EBITA for 1995 (US$124m, 22.1% margin), 5.0x net tangible capital employed (US$275m).
The transaction was financed with US$517m in senior debt (3.2x EBITDA), US$500m in subordinated notes (total debt 6.2x EBITDA) and US$391m in equity (72/28 debt to equity).
Subsequently EBITDA declined from approximately US$185m in 1998 to US$84m in 2000 as demand for bowling equipment declined and the losses mounted in Asia.
In Jul-01 AMF filed for Chapter 11 protection of the U.S. Bankruptcy Code with US$1.2bn in total debt. After a debt for equity swap AMF emerged from Chapter 11 with US$453m in total debt in 2002.
In Feb-04 affiliates of Code Hennessy & Simmons L.L.C. acquired all of the outstanding shares of AMF. Including some US$420m of debt the total consideration amounted to approximately US$670m.
This implied the following multiples for the year ended 29-Jun-03: 100% of sales (US$668m, 1.2x net tangible capital turn), 5.6x EBITDA (US$120m, 18% margin), 17.1x EBITA (US$39m, 5.9% margin), and 1.2x net tangible capital employed at 28-Sep-03.
The transaction was financed through the sale of 186 bowling centers for US$250m under a sale-leaseback facility, US$135m in senior secured debt, US$150m in subordinated notes and a US$135m equity investment.
In Dec-05 a consortium consisting of Cerberus, Supervalu, CVS Corp and Kimco Realty reportedly offered US$9.6bn for the outstanding common stock of US food retailer Albertson’s, Inc. Including the company’s net indebtedness of US$6.4bn, this valued the business at exactly US$16bn. This implied the following multiples for the twelve months to 3-Nov-05: 39% of sales (US$41,273m), 6.6x EBITDA (US$2,429m), 12.6x EBIT (US$1,272m), and 153% of net capital employed (US$10,427m).
On 3-Feb-05 the company had US$8.2bn worth of land and buildings (at book value) on it’s balance sheet. This represents approximately half of its stores and most of its administrative offices and distribution facilities. The remaining stores are leased. The presence of a real estate investor in the consortium implies that the consortium intended to use at least part of that real estate to finance the transaction. Refinancing the real-estate through a sale at book value and leaseback at an estimated yield of 5% would cut the purchase price in half, while only reducing EBITDA by only US$400m (1/6th) thereby reducing the purchase price multiple from 6.6x to 4.0x EBITDA.
Management rejected the offer as being too low and terminated the sale process and focusing on selling underperforming units of the company.
In Jan-00 acquired UK manufacturer of parachutes, inflatable equipment and polymer foils & coated fabrics Wardle Storeys plc in a public tender offer at 441 pence per share valuing the equity at approximately £114m. Including £11m in debt and after deducting approximately £15m in net cash the enteprise value of the transaction amounted to £110m. This implied the following multiples for the year ended 31-Aug-99: 95% of turnover (£115m, 2.8x net tangible capital employed), 6.4x EBITDA (£17.1m, 14.8% margin), 7.8x EBITA (£14.1m, 12.2% margin), 11.6x net profit (£9.5m, 6.2% margin), 2.6x net tangible capital employed (£42m).
The transaction was financed with £39.2m in equity and unsecured shareholder loans from the Alchemy Investment Plan (65/35 debt to equity) and a £75m in senior secured bank loans (4.4x EBITDA) consisting of two terms loans from Bank of Scotland (HBOS) paying 200bp and 250bp over LIBOR and a mezzanine tranche paying 1040bp over LIBOR.
Between Oct-00 and Jul-01 the company spent £34m on add-on acquisitions of which the £18.2m purchase of military parachute maker Irvin Aerospace from Hunting plc in Jun-01 (57% of sales, 6.0x EBITA) and the £13.5m purchase of Deutsche Schlauchboot Hans Scheibert GmbH & Co in Jul-01 were the most significant. These acquisitions were funded by a new £30m 12.5% mezzanine loan and a £17m 7% bridge loan both from HBOS.
In Feb-02 the company was split in two separate entities: Air-Sea Survival Equipment Limited (parachute and inflatable equipment divisions) and Wardle Storeys Limited (the technical products division). In order to enable the demerger the companies were refinanced.
In Apr-03 Wardle Storeys Limited further divided forming two entities: (1) Wardle Storeys (Group) Ltd, comprising the three northern sites of Earby, Blackburn and Bangor; and (2) Wardle Storeys Ltd. comprising Storeys Industrial Products operating on the Brantham site.
In Mar-05 affiliates of The Carlyle Group acquired substantially all of the shares of the Dutch petroleum refining, tank storage and marketing company Petroplus International N.V. (‘Petroplus’) in a recommended tender offer at €9.00 for every outstanding share of common stock or an optional stock alternative. This valued Petroplus’ equity at approximately €281m (including the take out of the company ESOP). Including approximately €151.7m in net debt (€242.5m minus €90.8m excess cash) excluding debt drawn under the working capital facility and adjusted for €22.6m in financial fixed assets (book value) this valued the company at some €410m.
This implied the following multiples for the 12 months ended 31-Dec-04: 6.5% of net sales (€6,261m, 13.5x net tangible capital turnover), 6.0x EBITDA (€68.6m – excluding non-recurring items like €46m book profit on sale of Tango gas stations -, 1.1% margin), 11.2x EBIT (€36.6m, 0.6% margin), 1.4x net tangible asset value (€200m) and 97% of the book value tangible fixed assets (€423m).
The acquisition was financed by: (1) €155m in equity from sponsors and Petroplus shareholders electing to receive equity in the buyout vehicle (70/30 debt to equity); (2) €345m in senior secured credit facilities (4.6x senior debt to EBITDA). This financing came in addition to existing US$1.13bn in aggregate amount of working capital facilities (of which US$540m was committed) and a €96m revolving guarantee facility (for VAT and excise duties) at 31-Dec-04.
Some relevant items
In Dec-04 Petroplus agreed to sell 80% of the Dragon LNG terminal it developed at Milford Haven (UK) to BG Group and Petronas. Although the sale closed the cash proceeds to Petroplus would not be available until certain milestones have been achieved (project financing, regulatory exemption and permits). This was expected to occur during Q2’05 but not before the end of Apr-05 and therefore not before the close of the tender offer. The book profit on the sale was expected to be within the GBP45-50m/€65-72m range (total cash proceeds were not disclosed). This would reduce the effective transaction valuation to approximately €352m or 5.1x EBITDA.
Prior to the equity tender offer, Petroplus offered to repurchase all of its outstanding €225m principal amount 10.5% senior notes due 2010 at 108.75%. On 2-Feb-05 97% of outstanding senior notes were tendered.
In Feb-04 Candover, JP Morgan Partners, 3i and NIB Capital agreed to acquire ABB’s Oil, Gas and Petrochemical (OGP) subsidiaries ABB Vetco Gray, ABB Offshore Systems (renamed Vetco International) for US$925m. This was somewhat below the original asking price of US$1.2bn and implied the following multiples: 54% of sales (US$1.7bn). No further details were disclosed.
The transaction will be financed by US$653m in debt and US$420m in equity (60/40 debt to equity). An additional US$50 in deferred consideration is conditional to performance post-closing performance.
