The long weekend in the UK already seems like a long time ago – it’s a busy morning here at PE Hub Europe.
The big news this morning is that TDR Capital-backed supermarket group Asda has agreed to acquire the UK and Irish businesses of petrol station company EG Group.
Next, Nina Lindholm speaks to Wise Equity about the firm’s recent exit from a motorsports company, before we take a look at some of the developments in private equity and generative AI.
We then have a bid for some public shares by Rhône Capital and the latest on a take-private offer by Silver Lake.
Rounding out the Dealflow, we have a deal in the vet sector by Ardian, frozen foods by IK Partners and social housing by Apollo.
Shopping
Big news in the UK today, as supermarket Asda – partly owned by private equity firm TDR Capital – has agreed to acquire the UK and Ireland operations of EG Group for an enterprise value of £2.27 billion ($2.81 billion; €2.62 billion).
The deal will see Asda take over 350 petrol filling stations and 1,000 food-to-go locations. Asda plans to invest £150 million within the next three years to integrate the businesses. The shareholders – which along with TDR are the Issa Brothers and US retail company Walmart – are providing £450 million of extra liquidity to fund the deal.
“The combination of Asda and EG UK&I creates a convenience and food retailing champion, with nearly £30 billion in annual revenues,” said Gary Lindsay, managing partner at TDR Capital, in a statement. “The two businesses are highly complementary, bringing together Asda’s traditional focus on mid-to-large sized supermarkets and EG UK&I’s on convenience retail, foodservice and fuel.”
Finish line
We have an aptly timed deep dive into a sports deal, as it comes just after the Monaco Grand Prix – arguably the most famous of the Formula 1 calendar – at the weekend.
Our resident motor sport fan Nina Lindholm looked under the hood of Wise Equity’s exit from Milan-based Tatuus Racing, a designer and producer of single-seater racing cars for junior categories within the Formula 1 and IndyCar pyramids. Wise Equity, also based in Milan, invested in Tatuus in 2017. Investment firm The Equity Club, via SPV TEC Racing, will acquire a majority stake in Tatuus.
The exit is coming later than expected, said Wise Equity partner Fabrizio Medea and principal Alessio Riccioni.
Like many industries, motorsport had to adapt during the pandemic. In Formula 1, the race calendar shrunk significantly in 2020, but the competing teams created bubbles, allowing them to travel around the world with minimal contact to others.
In Formula 4 – a category for junior drivers – most championships went ahead, but travel across continents was complicated, leading drivers to miss out on crucial races. “Most of the drivers participating in the Italian Formula Quattro Championship are not Italian,” said Medea. “It’s an important race – if you win that one, you will move on in your career.”
But Tatuus hit an unexpected growth path in 2021, according to Medea. “Incredibly, motorsport was an industry where more money came in after covid,” he said. “We decided to complete the growth path and put the company on the market at the end of 2022.”
“This was a company that probably was ready at the four-year mark, but covid pushed it to five years,” he added.
Read more on Wise’s ownership of Tatuus in the full interview here.
Generative AI
Everyone seems to be speaking about ChatGPT and generative AI these days, and the private equity world is no different.
Our colleague Carmela Mendoza over at Private Equity International rounded up some of the latest developments in that field, including one investor planning a ‘hackathon’ on potential ChatGPT applications, and another system that can conduct due diligence on private equity assets.
I wonder though how much data privacy laws, such as GDPR in the European Union, will limit these applications. Allan Bertie, head of European Investment Banking at Raymond James, told me a lot of his firm’s clients were using the technology in an “exploratory manner” – but pointed out the limits.
“You can’t plug proprietary data in,” he said. “How do you keep control of the data, the proprietary info? Data can’t just cross from server to server cross-border – that will be a brake on adoption and regulators already looking at this in Europe. The need to disclose/verify sources is also a concern – have you paid the licence for any of the third-party info?”
An alternative would be to pull data in to a private system, but that “will need so much server storage” internally – potentially making it unpalatable.
Bertie’s team has also used the technology, but had to audit the results.
“It needs very structured queries and to be very specific in parameters and methodology,” he said.
Minority position
Private equity firm Rhône Capital has made an offer of £28.50 per share for 20 percent of RHI Magnesita, a supplier of refractory products for high-temperature processes.
The offer price is a premium of 39 percent to the closing price on the London Stock Exchange on Friday. It values the company’s issued share capital at around £1.34 billion ($1.66 billion; €1.55 billion).
RHI Magnesita is headquartered in Vienna.
Support
Quick update from Friday last week on one of the take-privates we’ve been following.
The management board and supervisory board of German tech company Software AG on Friday recommended that shareholders accept the €32 per share offer for the company from private equity firm Silver Lake.
“We have thoroughly assessed the offer from Silver Lake in line with our fiduciary duties and with all stakeholder groups in mind,” said Sanjay Brahmawar, Software AG CEO, in a statement. “It offers an attractive premium, provides a high degree of transaction certainty, and fully supports our strategy as an independent company. In order to successfully execute the next phase of our transformation, Software AG would benefit from the stability and certainty provided by a single major shareholder.”
Bain Capital portfolio company Rocket Software had made an alternative, non-binding offer for Software AG. You can read more on that here.
Vets
Ardian has acquired a stake in Mon Véto, an independent group of general veterinary clinics in France.
Mon Véto is headquartered in Rouen. With over €180 million of turnover, the company now operates 231 clinics across all French regions and Belgium.
Ardian’s minority investment will consist of a €100 million capital increase to support and accelerate Mon Véto’s development in France and Europe, according to a release.
Barings, which has been financing Mon Véto’s debt for a year, will also increase its exposure in several tranches, up to €400 million, the release added.
Frozen food
IK Partners has agreed to acquire a majority stake in GoodLife Foods, a European manufacturer of frozen snacks, from Egeria Capital Management.
GoodLife is headquartered in Breda, the Netherlands. The company manufactures frozen snacks and meal components such as spring rolls, appetisers, burgers as well as cheese and vegetable bites.
GoodLife’s management will also reinvest alongside IK.
For more on the frozen food sector, check out Nina Lindholm’s deep dive into PAI Partners and Nestlé’s joint venture in the pizza business.
Social housing
Apollo has agreed to acquire United Living Group, a provider of infrastructure, social housing maintenance and construction services in the UK.
United Living is headquartered in Kent, England.
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