Private equity firm Advent International paid $588m last year to buy one of the world’s shipmanagers, V.Group, recently released documents reveal.
The deal, which is thought to be one of the biggest private equity investments yet seen in the shipping services sector, was settled with $429m in cash and $159m in loan notes and new equity.
Advent bought V.Group from Canadian pension fund OMERS Private Equity in March 2017. Now, for the first time, details of the deal and V.Group’s financial position can be seen in documents filed last month with UK business authorities.
Advent holding company AI Mistral acquired 100% of V.Group’s previous holding firm Vouvray Holdings and its subsidiaries for “a consideration of $588m”.
A senior shipping industry accountant who reviewed the financial statements for TradeWinds said they appeared to be relatively conservative in their approach, which might support the group’s aim to seek a public listing in several years.
V.Group chief executive Ian El-Mokadem told TradeWinds’ magazine TW+ last month: “As you probably know, one of the things we are thinking of doing is listing the business. I have done that before, so I guess that is one of the reasons why I’m here.”
The strategic report contained in the documents made no explicit mention of when or how a possible initial public offering might take place.
The head of a rival major shipmanager, who spoke on condition of anonymity, said the results appeared to support the case that Advent’s long-term aim is to exit its investment through a public listing.
A new management team led by El-Mokadem and appointed by Advent spent $22.9m in 2017 starting a transformation drive to "de-layer" management and give the CEO a direct line of reporting from all customer-facing divisions.
Cost breakdown
Included in that total was $9.3m in redundancy costs, $11.3m to consultants and $2.4m in other business transformation costs.
“Termination costs” of the group’s highest-paid director — likely to have been El-Mokadem’s predecessor as chief executive, Clive Richardson — were $661,000. Total wage costs of the group’s 3,755 staff came to $161m.
V.Group’s customer relationships are valued at $419m, its brands such as V.Ships and Selandia at $136m and software at $10.8m.
Immediately after the acquisition, Advent refinanced V.Group’s debt with a series of loans totalling $775m. A $515m, seven-year first lien facility is priced at 3% over the London Interbank Offered Rate (Libor), while a $172.5m eight-year second lien facility is priced at a much higher 8% over Libor.
The group also has a further $57.5m revolving credit facility and a $30m acquisition facility available until March 2019, giving it the firepower to move fast if new deals present themselves.
Annual interest payments on the debt will be $40m, with a further $5.2m in principal repayments, although the group is confident it has sufficient resources to repay.
Group revenues were little changed in 2017 at $546m compared to $536m a year earlier, while Ebitda before separately disclosed items rose 7.7% to $88.8m, lifted by acquisitions and growth from catering and purchasing. Statutory profit after deductions but before tax was $12.6m in 2017. No comparable figure was disclosed for 2016.
Advent’s purchase of V.Group marked its fourth change of ownership since it was founded in 1984. Exponent Private Equity bought the company from its management in 2007 for $338m and sold it to OMERS for $520m, including debt, in 2011.
In his group strategic report which accompanied the figures, El-Mokadem said he aimed to make V.Group “internationally recognised as the number one independent provider of global maritime support services".
Last week, El-Mokadem told TradeWinds that progress transforming the business was nearly complete. “Our plans are basically on track, with much of the organisational changes complete," he said.
“We continue to work on new propositions to drive growth, and our marine services businesses are generally doing well, with strong demand for some of our industry-leading services such as catering.”
At the end of 2017, V.Group had 642 vessels under full technical management, making it the world’s largest technical shipmanager, with a further 298 vessels under crew management. Cost management “is a high priority for all vessel managers”, El-Mokadem said in the annual results.
As part of its expansion aims, V.Group said it paid $5m for Graig Ship Management, which had 17 vessels under full technical management. Some $3.5m of the total was paid initially, with a further $1.5m due depending on the size of the Graig fleet on the first anniversary of the deal.
V.Group’s other transactions included the creation of Dania Ship Management in collaboration with Nordic Tankers Trading, in which it invested DKK 200,000 ($29,000).
A partnership with Clipper Group for the full technical management of 26 dry cargo vessels started at the end of January this year and so is not included in the figures.
The ultimate owner of V.Group is Advent’s GPE VIII private equity fund, which raised $13bn from investors in early 2016 to plough into business and financial services, healthcare, industrial, retail consumer and leisure, technology, media and telecoms.
Investment plans
Advent said at the time it would seek to invest in well-positioned companies with the potential for further operational improvement and partner management teams to create value through revenue and earnings growth.
Advent has two non-executive directors on V.Group’s board, James Brocklebank and Haris Kyriakopoulos. Previous majority owner OMERS, which has retained an equity stake, is represented by Mark Redman.
Advent is a large private equity manager that has invested more than $40bn in over 335 investments since it was founded in 1984.
