Warburg Pincus seals Clondalkin deal

Irish packaging group Clondalkin has been sold in a deal valuing the group at €630 million. US private equity firm Warburg Pincus closed the deal yesterday following negotiations that began last September.

Warburg Pincus has acquired the 85 per cent stake of Clondalkin held by rival private equity operation Candover. It has also acquired some of the shares previously held by the management team led by Mr Norbert McDermott. This is understood to be the stake of former company chairman and managing director Mr Henry Lund.

Mr Lund, who has been associated with the company for more that 20 years, is understood to hold around 3.3 per cent of the company which, on the basis of yesterday's deal, could be worth up to €20.5 million. Up to 70 Clondalkin management will hold a stake in the group following the deal.

The deal is subject to regulatory approval but neither party expects a problem in this area.

For Warburg Pincus, the deal is the largest the firm has ever done in Europe in its 35-year history and also the first management-led buyout in the region. In total, the acquisition is likely to have cost Warburg Pincus more than €555 million although neither side was prepared to divulge the cost or structure of the deal.

Candover led a consortium of private equity investors that funded the management buyout of Clondalkin in late 1999 - the first management buyout of an Irish public company.

That move, led by Mr Lund, came amid frustration at the company's inability to attract the interest of investors. "The company was doing fine but we were a small cap and no-one would buy the shares," said Mr McDermott.

He praised the positive contribution of Candover in the past four years. "We have continued to do what we have done for the previous 15 years and that is grow the business at the rate of between 10 and 15 per cent per annum," said Mr McDermott.

Welcoming the deal, he said Warburg Pincus was liable to be more ambitious. "Warburg are the number one operator in the Far East," he said. "They are well ahead of the pack and that was one of the things that interested us."

Clondalkin currently operates in Ireland, Britain, continental Europe and the US. Ireland and Britain account for about a quarter of the business, with the rest of Europe taking 55 per cent and the US the balance. However, it currently has no presence in the Far East. It also hopes to use Warburg's strength in the US to grow its business there.

Mr Dalip Pathak, head of European operations for Warburg Pincus, said: "We're perfectly positioned to help expand this company in the United States and Asia," adding that Warburg Pincus planned to use Clondalkin as a base for making other acquisitions, first in the US later this year.

Mr Steve Coates, a managing director at the firm said that Warburg had built a close relationship with Clondalkin recently. "We believe our extensive international resources and long-term investment horizon offer an excellent complement to Clondalkin's continuing growth strategy."