UK-based asset manager Gresham House has secured a £25 million ($34 million; €28.3 million) deal to buy renewable energy, timber and forestry fund manager FIM Services.
The transaction would provide a significant boost to the firm’s New Energy division, launched in October last year, lifting its assets under management in the renewables sector by about £258 million to £344 million. FIM manages about 137MW of UK-based onshore wind and solar assets bought through its renewable energy funds.
Gresham, which is 20 percent owned by the Berkshire Pension Fund, made its first major move in the sector last year with the acquisition of Hazel Capital, providing it with a significant energy storage development pipeline. It added three operational storage projects to the portfolio in February.
FIM also manages £635 million of forestry assets, covering 83,000 hectares. The two asset classes combined are set to provide Gresham House with a return above its 15 percent return on capital hurdle, it stated. Gresham will fund the deal through £11.2 million in cash and £9.8 million in loan notes, with a further £4 million subject to performance targets being met, providing an EBITDA multiple of up to 7.4 times.
Gresham House has also raised about £15 million (before expenses) through the placing of new ordinary shares, a portion of which will go towards funding the cash element of the deal. The placing shares, offered at a price of 410 pence each, represent approximately 19.68 percent of the company’s share capital.
“The acquisition of FIM will allow Gresham House to achieve scale and establish a market-leading position as an investor in UK commercial forestry, whilst also enhancing the Gresham House New Energy division,” said Anthony Dalwood, chief executive of Gresham House. “The strategic rationale, alongside the potential financial returns, are clear and exciting for Gresham House shareholders.”
The acquisition of FIM will not be funded through Gresham House’s British Strategic Investment Fund, unlike its move for Hazel Capital. The fund targets investments in UK infrastructure and housing and had reached a size of £165 million at the end of last year, following commitments from UK pension schemes. A final close of £250 million is expected by the end of the year.