Deal: Center Parcs flotation
Bookrunner: Collins Stewart
Size: £245 million ($197.5 million)
Date: December 11 2003
Collins Stewart floated the UK leisure group Center Parcs on the London Stock Exchange's Alternative Investment Market (Aim) through a simultaneous auction and public share offering last month. It was the second such deal from Collins Stewart in 2003.
Private equity group MidOcean Partners was selling the holiday parks operator. Collins Stewart used a special vehicle company, Arbor, to make a bid through an auction. Then the broker listed the company on Aim by pre-placing shares with a group of more than 30 institutional investors, mainly from the UK.
The Collins Stewart bid of £285 million, which included loan notes and cash, was selected in an auction against five bidders. The whole process enabled Center Parcs to complete an IPO in weeks rather than months.
"The way the sale was conducted provided us with a lot of stability," says Center Parcs CEO Martin Dalby. "It was all over pretty quickly. A normal IPO could have taken three to six months," he says.
The process also ensured that MidOcean, the group formed in February 2003 by the management buyout of DB Capital Partners' US and European late-stage private-equity portfolio, was able to dispose of its entire equity stake in Center Parcs. IPO price uncertainty can often makes this difficult.
Future market access
"The deal was a very appealing exit strategy," says Graham Clempson, European managing partner of MidOcean.
"It achieved a good price through a competitive auction and allowed for a quick public market disposal. This is good for the management team of Center Parcs as it will allow them to access the capital markets in the future if they need to," he adds.
A public market listing was also preferable for Center Parcs – an acquisition by a trade buyer could have led to extensive upheaval.
DB Capital Partners, Deutsche Bank's private equity business, acquired Center Parcs in March 2001 when its former owner, UK brewing company Scottish & Newcastle, put it up for sale. The group put in two separate bids. One was for Center Parcs' UK operations. The other was a joint bid with French holiday parks operator Pierre et Vacances for the group's European business. The total value of the deals was about £700 million.
Before disposing of its investment, DB Capital Partners first orchestrated the purchase of a fourth UK park for Center Parcs and a sale and lease-back of the company's properties to Sun Capital in a deal worth £465 million in September 2002. This November, MidOcean sold its 50% share of the European business to Pierre et Vacances for €270 million.
The Aim IPO, completed on December 11, raised £245 million and allowed MidOcean to retain some consideration in the business through £52.5 million of loan notes.
The senior management of Center Parcs made over £10 million out of the listing and Collins Stewart pocketed £9.8 million from its 3.5% arrangement fee and 0.5% underwriting fee. MidOcean, meanwhile, says it made 3.7 times its investment on the European business and between four and five times its investment in the UK business.
This type of deal structure was last used by Collins Stewart in Suez's divestment of UK utility Northumbrian Water last May. At the time, many in the market were unsure if the strategy could be replicated.
For this type of deal to work, the company being bid for and sold must be an easy sell because the broker has to be able to pre-place the shares and bid in the auction in a short space of time. Defensive companies with simple structures and very predictable businesses are most easily analyzed and readily appreciated by investors, making them easy to sell quickly in such a process.
Collins Stewart hopes to use this strategy again in the scramble for Hollinger's newspaper group Telegraph.