General Electric (GE) today agreed to acquire around a 90% stake in Converteam, a French provider of electrification and automation equipment and systems, from a private equity consortium that includes Barclays Private Equity and LBO France. The deal is valued at €2.27 billion, or approximately $3.2 billion, and is expected to close during the third quarter. Company management will retain the remaining 10%, with GE expected to acquire those shares over the next two to five years for no more than $480 million in stock.
This is basically the third time that Converteam has been acquired in the past five years. Here is a quick look at the previous two transactions, as disclosed at the time:
- November 2005: Barclays Private Equity carves Converteam out of Alstom SA for just €150 million, which converted into $177 million at the time. It appears to have received a two-thirds equity position, with management holding the remainder. No word on how much leverage was involved.
- September 2008: Barclays sells half of its stake to LBO France, in a deal that valued Converteam at around €1.8 billion, or $2.79 billion at the time. The deal was competitive, with GE among those losing out to LBO France.
So it initially appears that Barclays Private Equity’s initial $177 million investment (including leverage) is now valued at $2.13 billion, over a six-year hold. Unfortunately, it’s not quite so easy. A source says that Barclays actually sold its entire stake in the 2008 deal, and then reinvested. Clearly still an outstanding return, but impossible to know exactly how high without more data (which Barclays, for some reason, will not disclose).
We’ve got similar problems calculating LBO France’s return. All we know for sure is that Converteam today is worth nearly 32% more than it was at the time of its 2008 investment. Not bad, but not huge cash-on-cash for a big buyout group. Got to wonder if the folks in Paris wish they had been a bit slower on the paperwork, since the deal closed just before Lehman Brothers collapsed. In fact, it was one of the last leveraged loans that Lehman ever arranged….
It’s obviously too soon to know how GE fared — need to watch Converteam revenue, integration, etc. — except to say it clearly paid a price for losing out to LBO France in 2008.