The deal provides an exit for London-listed 3i Group plc, but is not one the buyout firm is keen to trumpet from the rooftops. The business was written down to zero on 3i's books in March 2011 -- and the proceeds from the sale for 3i and its managed funds together will be just £14.5 million. The proceeds accruing to 3i's balance sheet alone will be £8 million.
"Although the holding has been written off, we do not think there will be a material [net asset value] impact given the quantum of prior ranking debt," wrote listed funds analyst Christopher Brown of JPMorgan Securities LLC, "although the sale does close the chapter on a very disappointing investment."
3i, which took Alternative Investment Market-listed Enterprise plc private for £502 million in May 2007, declined to comment on its return or the current debt structure of the business, which suffered after the financial crisis as many of its government and municipal clients cut spending.
But a look back at the Enterprise plc annual report for the year ending December 2007 shows the company had splashed out on the further take-private of fellow services provider Accord plc later that year for £195 million. It ended that reporting period with net debt of £770 million and had paid out £49.3 million in net interest costs for the year. At the end of 2007, the company's capital structure included senior bank debt of £540 million, payment-in-kind notes of £75 million and preference shares and shareholder loans of £212 million.
Construction and transport infrastructure heavyweight Ferrovial will acquire Enterprise through its Ferrovial Services division. The deal is still subject to European Commission clearance, but Ferrovial plans to merge Enterprise with its U.K. arm Amey, an infrastructure and municipal services provider it acquired in 2003. Ferrovial said the combined U.K. operation will have more than 21,000 employees, revenue of more than £2.3 billion and a combined order book of £8.2 billion. It said the merger will double the size of its U.K. services business and create cost and revenue synergies estimated at £40 million.
Enterprise generated £1.1 billion in revenue in 2012, according to Ferrovial. It has 9,600 employees and provides environmental, property and utilities services as well as road maintenance for public and regulated sector clients.
The numbers do not include EnterpriseMouchel Ltd., Enterprise's joint venture with U.K. peer Mouchel Group plc, which is not included in the acquisition. Instead, as was announced separately Thursday, Mouchel will acquire the 50% of the joint venture it does not already own. The price was undisclosed, but a spokeswoman for Mouchel said the change of ownership would allow EnterpriseMouchel to compete with Enterprise/Amey for contracts in certain areas including highway maintenance, which were previously off limits to the joint venture.
Mouchel was taken over by its lenders Barclays plc, Royal Bank of Scotland Group plc and Lloyds Banking Group plc in a debt-for-equity swap last August and delisted from the London Stock Exchange. The spokeswoman said the company was encouraged that the banks, which still own 80%, were prepared to support the acquisition, which they saw as an important source of revenue.
John E. Sorkin joined Ropes & Gray LLP's mergers and acquisitions practice as a partner in New York. For other updates launch today's Movers & shakers slideshow.
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