European buyout firm Hg Capital has sold UK cosmetics business Sanctuary Spa Covent Garden to trade buyer PZ Cussons for £75 million ($148.9 million; €100.9 million), according to HG Capital’s head of consumer and leisure Richard Mathews.
The sale produced a five times return on Hg Capital’s original investment and a 100 percent internal rate of return. Hg bought the business in 2005 for £24 million.
Mathews said: “It was a spa business with a little bit of licensed income when we bought it. Our investment hypothesis was to buy in the licence and that’s exactly what we did.”
Hg added a management team at the company and began selling the Sanctuary Spa brand as its main business line, while continuing to operate the Sanctuary Spa in Covent Garden, which attracts 64,000 guests a year. In the year ending 2007 the company had EBITDA of £6.4 million.
The firm also brought the company’s finance and marketing in-house and grew the brand aggressively. Sanctuary Spa has also expanded into the US and the Far East. During the period September 1 to December 31 retail sales increased by 11 percent at the company.
This is the seventh transaction by HgCapital since August 2007. Hg’s activity is in line with peers in the European mid-market, in the fourth quarter of last year deals below €160 million ($235.9 million) increased by 17 percent in number and value to 159 and €7.68 billion respectively, according to European buyout firm Candover’s Unquote Barometer.
Larger European mid-market deals are still possible unlike mega buyouts. Although deals below €1.65 billion and above €160 million fell by nearly 50 percent in value to €13.3 billion and in number by more than half to 24, according to Candover.