Catalyst identifies proxy for resources boom

The Australian services provider builds and operates remote accommodation camps for the likes of Fortescue Metals Group, Xstrata and QGC, catering to workers who are flown in and out. Expectations that demand for Morris' services will remain robust led Catalyst Investment Managers to purchase a 49% stake in the firm in February.

"It's a sector with an interesting dynamic, Morris is a big player and we were aware the company was privately owned," John Story, Catalyst's managing director, tells AVCJ. "There are a lot of businesses with growth aspirations in the natural resources space and they may not have the capital to fulfill these aspirations."

Australian banks are increasingly wary about the amount of leverage they are willing to grant privately-owned companies and there is also a recognition among the companies themselves that too much leverage can be damaging. Story sees private equity as a good antidote: The companies are open to taking on board third-party capital and expertise, while the major domestic banks that dominate mid-market financing are comfortable dealing with private equity players.

Another deal, with a similar investment thesis, is expected to follow shortly.

The value of the transaction was not disclosed, but Morris has annual revenues of around A$200 million ($214 million). Catalyst is currently investing out of Catalyst Buyout Fund 2, which closed at A$598 million in March 2009. The PE firm, which has offices in Sydney, Melbourne and Perth, typically makes 6-7 investments from each fund, targeting companies with an enterprise value of A$75-200 million. Ernst & Young advised Catalyst on the Morris deal, the third transaction realized by the current fund.

Morris was a family-owned business until 1995 when Robert McVicker and company management completed a buyout. Subsequent to Catalyst's investment, they remain the majority shareholders and Fiona Berkin will continue to lead the team as managing director.

There are two parts to Morris' business: facilities management, which doesn't require significant capital investment, and facilities construction, which does. Catalyst's funding will be used to boost the take the construction side to the next level, principally in Australia but also with a view to expanding overseas.

"There are a lot of opportunities in Australia, given the huge amount of capital being put into the resources sector," says Story. "At the same time Morris has a history of operating internationally and we see building the business in Asia as a mid-term opportunity."

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