PE Deal of the Year – Hyva
UNITAS CAPITAL’S BUYOUT OF DUTCH cylinder-maker Hyva earlier this year was a landmark private equity deal in that it was the first in Asia to be backed by a high-yield bond. Not only did the company’s $375 million bond issue set a precedent for other Asian investors to consider less traditional leverage options, but Unitas’ John Lewis, who led the deal, said it has provided Hyva with a “lot more flexibility” in terms of repayments than the typical Asian syndicated loan structure.
Unitas purchased Hyva from 3i Group as part of a secondary buyout in May. Unitas was the only bidder able to secure interim bank financing by the final deadline for the deal. "That was critical," says Lewis. "A lot of the other bidders were looking at European financing but the European lenders just couldn't get comfortable with exposure to cash-flows and collateral in China and India."
The initial debt package would have been made up of a $350 million five-year term loan underwritten by a syndicate of Asian banks.
3i and Hyva's management were also impressed by Unitas' knowledge of Hyvas' key end markets of China and India - where the firm commands market shares of 43% and 90%. This local knowledge allowed Unitas to overcome the hurdles imposed by the Chinese regulators in particular, something which Lewis says "a lot of Asian PE firms would have experience of but for investor coming from outside of Asia, that was a fairly daunting process".
He believes another factor which helped Unitas triumph in the auction process run by Credit Suisse was its operational know-how. Heavy hitters on the team include partner Jim Tsao, who was previously group managing director of Lam Soon H.K. Group.
It's unsurprising why Unitas was attracted to Hyva, meanwhile. The company was experiencing 20% annual growth and seemed a logical target for an Asian investor as 70% of its sales hail from the region. The private equity firm also identified the strong growth potential of the mining, infrastructure and environmental services sectors to which Hyva is heavily exposed. As well as hydraulic cylinders, it produces cranes and other equipment such as waste compacters, for which Unitas expects demand to rise in the coming years.
Plans for Hyva include growing the firm through both acquisitions and organic means, by developing its existing products and services and gradually introducing new ones to the market. "We're very excited about potential of business," says Lewis. "We haven't made any serious money out of it yet but we think prospects for the next few years are good."
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