Deal focus: KV Asia finds another way into PPE

Honeywell is the runaway leader in the global electrical personal protective equipment (PPE) segment, supplying rubber gloves and sleeves, insulated clothing, face shields, and hard hats used by workers tasked with maintaining high-voltage power lines or inspecting electric vehicle (EV) batteries. Yet this accounts for a small part of the company’s overall business.

Of Honeywell’s USD 34.4bn in sales last year, less than one quarter came from safety and productivity solutions. Within that division, safety and retail accounts for 30% of business – advanced sensing technologies and automation are bigger drivers – and then electrical PPE represents just one business line within a broad safety and retail portfolio.

This is problematic, according to Jeremey Tan, a partner at Southeast Asia-focused private equity firm KV Asia Capital, because it means electrical PPE is relatively unloved. The segment receives little time and money, leading to supply chain pressures. Ansell, the other global market leader, is in a similar position. “If you put in an order for a pair of gloves, it takes 3-4 months to reach you,” he said.

KV Asia recently acquired G.B. Industries (GBI), a Malaysian manufacturer of rubber insulating gloves and sleeves, that Tan claims is eating into Honeywell and Ansell’s market share. The company produced household rubber gloves until 15 years ago and has risen from zero to number three in the global electrical PPE market. The typical order turnaround time is six weeks.

This is the second investment from KV Asia’s second fund, which is currently in the market with a target of USD 300m. The firm didn’t disclose how much it paid for GBI, but the deal falls within the USD 25m to USD 75m equity cheque sweet spot.

Pursuing a premium

Succession planning was one of the motivating factors – the founder has been in situ since 1987 – but capital and professionalisation were also considerations. GBI is in the process of building a new plant that will increase annual capacity for gloves from 348,000 pairs to 415,000 pairs and sleeves from 34,000 pairs to 78,000 pairs. This will bring additional operational complexity.

As for the professionalisation angle, KV Asia has already taken grocery retailer TF Value Mart on this journey – culminating in a sale to Intermediate Capital Group in 2020 – and Tan said this resonated with first-generation business owners in Malaysia.

“If they want to exit, they can’t command a premium because they are family run. If the business is institutionalised, that premium is possible,” he said. “We are bringing in a CFO and a deputy CEO; we are documenting the manufacturing process; and we are patenting these processes, which hasn’t happened before because they were worried someone would reverse engineer their capabilities.”

The latter issue is pertinent because GBI’s approach is more palatable from a sustainability perspective than those of its peers. Manufacturing is typically solvent-based, but GBI uses water – the legacy of a strategic acquisition made when it first entered the electrical PPE space.

Operating under the Novax brand, the company ships to blue-chip customers, including Tesla and BP, in over 40 countries. Most buyers are in developed markets – notably the UK and Germany – but business is picking up in China. According to Roland Berger, the global B2B electrical PPE market was worth USD 1.9bn in 2020 and will see compound annual growth of 7.5% through 2027.

KV Asia will help GBI stay ahead of the game from a product perspective as well. Tougher workplace safety and insurance regulations are behind increased uptake, but there is plenty of scope of innovation in terms of usability.

“These gloves are thick, and they run from the wrist all the way up the below. Then you put on sleeves to protect the entire arm and a security blanket to protect conductivity areas,” said Tan. “That’s a heavy latex product, and these guys are working on high-tensile cables for 30 minutes or more. Taking away one pound in weight can make a lot of difference.”

There is history in terms of private equity and industrial PPE in Southeast Asia. Navis Capital Partners bought Singapore-listed protective bootmaker King’s Safetywear at a valuation of USD 74m in 2008. Three years and one significant bolt-on acquisition later, it sold the business for USD 338m. The buyer? Honeywell.

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• Topics
• Southeast Asia
• Buyouts
• Industrials
• Malaysia
• KV Asia
• manufacturing