Private equity firm Triton acquires Alstom unit for $1bn

May 2014 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

German private equity (PE) group Triton announced on 1 April it had agreed to acquire the auxiliary components business of Alstom’s Thermal Power division for an enterprise value of around $1bn.The deal, which has been approved by Alstom’s board of directors, is expected to close in the first half of the company’s 2014-2015 fiscal year.

Triton, which invests primarily in northern Europe – most notably in Germany, Austria, Switzerland, Denmark, Finland, Norway and Sweden – focuses on businesses in the industrial, business services, and consumer/health sectors. Accordingly, the acquisition of Triton’s heat exchange unit will further complement other purchases the firm has made in this area.

Triton is believed to have bettered offers for the Alstom unit from fellow PE firms Bain Capital and Astrog Partners. Triton has arranged committed debt financing to help fund the acquisition from a number of banks including Barclays, Citi, ING, RBC and Societe Generale. The financing provided by the banks will total around €430m – or about six times the heat exchanger unit’s approximate €73m of earnings before interest, tax, depreciation and amortisation. The financing will take the form of senior and second lien leveraged loans denominated in both euros and dollars. The remainder of the financing not provided by the banks will be derived from Triton’s own funds. “Triton looks forward to working with the management team and employees to strengthen and grow the company,” said Peder Prahl, a managing partner at Triton, in a statement announcing the acquisition.

Alstom’s decision to divest the unit came on the back of recent financial strife. Of late the company has been greatly impacted by a significant drop in orders for power equipment from utility companies suffering from weak electricity prices. The sale of the unit will provide Alstom with a much needed, and somewhat unexpected, financial boost. Although in November the company announced that it would attempt to raise around €2bn by divesting a number of non-core assets, the agreed sale price for the unit far exceeded both internal and external expectations. Alstom is raising the cash to pay down its debts and give it the flexibility to make acquisitions in faster-growing markets. The funds are also required to help offset the ongoing decline in demand for power equipment. The company’s further divestitures will come predominantly from its European operations. Alstom reduced its footprint both in Europe and the US in 2009 as the demand for power equipment from utilities fell after the recession. Despite further retrenching in Europe, the company will continue to invest in partnerships and plants in emerging markets. “This transaction highlights the strength and value of Alstom portfolio of activities, and illustrates the group’s ability to deliver on its strategy of selective, value-enhancing disposals,” said Nicolas Tissot, chief financial officer of Alstom.

The announced sale price of the unit was positively met by the markets. On 2 April, the day after the deal was announced, Alstom’s share price increased by 7 percent.

Triton, founded in 1997, currently has around 25 companies in its portfolio, and over 55,000 employees. The firm’s portfolio has combined annual sales of approximately €13bn. The heat exchanger unit is expected to post revenues in the region of €430m in the financial year ending 31 March, with a double-digit operating margin. The unit currently employs around 1500 people worldwide with operations in Germany, the US, Japan, China, India, Brazil, Switzerland and the Czech Republic. The company’s headquarters are expected to remain within Germany when the deal is completed.

Richard Summerfield