Flush With Cash, Private Equity Giants Return to Old Haunts

(Bloomberg) -- The private equity bid for Germany’s Scout24 AG is another case of history repeating itself.

Hellman & Friedman and Blackstone Group LP, which sweetened their offer for the online classifieds firm to 4.9 billion euros ($5.6 billion) on Friday, held stakes in the company before it went public in 2015. Both firms made their initial investments in 2014, and Hellman & Friedman didn’t fully exit until four years later, according to its website.

In an environment where targets can be hard to come by, financing is cheap and large piles of dry powder are waiting to be spent, private equity firms are finding that going after firms in industries where they already have expertise gives them an edge.

“What we’re seeing is the function of a very competitive market with funds being attracted to businesses that they already know well,” said David Walker, a partner at law firm Latham & Watkins LLP. We’re seeing more deals to take listed companies private because “there are not so many large, high-quality, secondary buyout assets on the market,” he said.

In December, CVC Capital Partners offered almost $2 billion to buy out the shares it didn’t already own in Ahlsell AB, a Swedish building-products supplier that CVC had originally bought in 2012 and then listed in 2016.

Apollo Global Management made a bid in January to acquire British packaging maker RPC Group Plc in an attempt to replicate its investment in U.S.-based Berry Plastics. Its offer was challenged when Berry, which changed its name to Berry Global Inc. in 2017, said it was also considering a bid for the U.K. firm, a sign of the increased competition for assets in a buoyant deals market.

Advent International and Bain Capital agreed to reinvest in payment firm Nets A/S as part of a 33 billion kroner ($5 billion) deal to sell the firm to Hellman & Friedman in 2017.

The following European companies’ share declines may make them particularly vulnerable to potential private equity interest, according to dealmakers who asked not to be identified because their planning is private. Representatives for ConvaTec, Elementis, GEA, Stroeer and Leoni declined to comment. Sophos, ProSiebenSat, SLM and Bilfinger didn’t immediately respond to requests.

  • ConvaTec Group Plc fell to its lowest level in over two years on Thursday after the medical equipment maker said 2019 won’t be as profitable as investors were expecting.
  • Elementis Plc has dropped more than 22 percent in the last year. A number of analysts, including HSBC Holdings Plc, have cut their outlook for European chemical firms in recent months. In November, a U.K. parliamentary study warned that the country’s industry is at risk of being paralyzed by red tape after it leaves the European Union. The firm said it has a plan to reignite growth.
  • Sophos Group Plc, a U.K. cyber security company, has seen slowing growth and in January said it will probably see a “modest decline” in billings for the full year. Its shares are down 36 percent in the last 12 months.
  • GEA Group AG has dropped 46 percent in the last year. The company reported 2018 results that missed analysts’ expectations and gave an outlook for this fiscal year that a Baader analyst called “disastrous.”
  • ProSiebenSat.1 Media SE has declined about 49 percent in the last 12 months as the German company’s traditional television broadcast format was challenged by subscription video-on-demand platforms. Chief Executive Officer Max Conze is aiming to increase revenue from digital activities. In January, the firm denied rumors of a potential takeover by Axel Springer SE.
  • Stroeer SE is down 21 percent in the last year. The media and marketing company’s two largest shareholders are board member Dirk Stroeer and Co-CEO Udo Mueller.
  • Leoni AG’s shares have declined 62 percent in the last twelve months. The German supplier of cables for the automotive industry this month suspended its dividend in wake of declining earnings.
  • SLM Solutions Group AG shares have declined about 77 percent in the last 12 months. In 2017, General Electric Co. withdrew a takeover offer for the 3-D printing company after hedge fund Elliott Management Corp. bought a large stake and pushed for a higher offer.
  • Bilfinger SE shares have declined 16 percent in the last year. CEO Thomas Blades has said the company’s customers, predominantly in chemicals and oil and gas, are robust and that the firm doesn’t share the same uneasiness as many other industrial players that are focused on the German market.

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