Gresham sells airport and defence business to Babcock

UK mid-market private equity firm Gresham Private Equity has sold its investment in Alstec Group, a nuclear and airport services operator, to asset management business Babcock International Group.

Gresham sold Alstec to Babcock, itself currently the subject of a takeover bid by defence companies BAE Systems and VT Group, for a cash consideration of £44.9 million.

According to Gresham, the exit has generated a 4x money multiple on its original investments. The firm’s Birmingham office backed the management buyout of Alstec, then known as Alstom Automation Group, in May 2000 in a £53 million transaction.

Ken Lawrence, managing director at Gresham, told PEO that the original investment, made from the firm’s second fund, “had a number of facilities to enable the purchase to go ahead and management were able to repay the debt quite quickly. Around three years ago, we carried out a refinancing which generated a two-times money multiple for Gresham at that point”.

Lawrence added that the sale of Alstec to Babcock was on a debt-free, cash-free basis.

Leicestershire-headquartered Alstec operates in the nuclear, airports and defence systems sectors and has a customer base including BAA, BNG, UKAE, British Energy and the Atomic Weapons Establishment.

The company’s airport services business provides operations and maintenance services for BAA’s automated baggage sorting system at Heathrow and the inter-terminal transport facilities between all terminals at the airport.

The defence business designs, supplies, maintains and upgrades equipment for the Ministry of Defence and its equipment suppliers for submarines, surface ships and aircraft.

Gresham’s previous exits were the sale of national claims management business ANSA to Mayinwood in July 2005 for a 3x money multiple; the divestment of MSS, a specialist in the development and manufacture of foam pressure-reducing products for the healthcare market, to US trade buyer Invacare in April 2005; and the sale of filter systems and acoustic equipment manufacturer Altair to GE Systems in February of this year.

London, Birmingham and Manchester-based Gresham is currently investing its vintage-2004 Gresham III fund, which closed on £235 million. The firm specialises in investments in the business and support services, consumer, financial services, healthcare/pharmaceuticals and industrial products sectors.