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British firm takes control of Moeller

01 July, 2005

A UK-based private equity firm, Doughty Hanson, is buying a majority stake in the German industrial and building controls manufacturer Moeller Electric from its previous owner, Advent International, for €1.1bn - including pension liabilities and debt. Other companies reported to have shown an interest in buying Moeller, include Siemens, Rockwell Automation and Eaton.

Advent acquired Moeller in December 2003 at a time when the previously family-owned company was suffering heavy losses. Advent expected that it would take five to seven years to turn Moeller around. In fact, it managed to return Moeller to profitability within 12 months of the take-over, largely through a series of strategic disposals - including the sale of its busbar trunking business to Siemens - which together netted more than €100m in cash.

In addition, two manufacturing plants were closed in Germany, and some production was transferred to Eastern Europe and Asia.

Moeller`s remaining core businesses - motors, starters and drives; industrial automation; circuit-breakers; command and control devices; and building automation - have since generated an organic growth rate of around 14%, compared to an industry average of 4-5%. Revenues from these core sectors in 2004/05 were €760m, and the company`s debt has been reduced to less than €50m. The number of employees has fallen from around 11,000 in 2003, to about 8,000.

"Moeller has staged an incredible financial recovery," says the company`s chief executive, Theo Kubat. "We were significantly loss-making two years ago, and today we are enjoying double-digit sales growth rates. Doughty Hanson`s investment will help us to solidify our market-leading position and support a long-term growth strategy by capitalising on opportunities in Eastern Europe and Asia."

Kubat adds that Moeller will soon be opening further production facilities and offices in these areas.

Doughty Hanson has a strategy of acquiring market-leading mid-to-large-sized businesses. It has previously been involved with other engineering companies including Elexis and Dunlop Standard. It is investing €192m in Moeller, whose management will keep a minority stake in the business. Mizuho and Morgan Stanley are underwriting an acquisition debt facility of around €650m.

According to Doughty Hanson, Moeller`s attractions include its strong, experienced management team, its high levels of product innovation, its reputation for safety, reliability and service, and its large addressable market, estimated to be growing at 4.1% a year.

"High-quality engineering, strong brand names, a state-of-the-art product portfolio, and leading market positions, are some of the key features that make Moeller an excellent company," says Doughty Hanson`s Claus Felder. "We look forward to working with the management, and to further develop Moeller`s key strengths and to take advantage of growth opportunities in Eastern Europe and Asia." At present, 75% of Moeller`s sales are in Europe.

The deal, which is subject to regulatory approval, is expected to close in August. Advent is considering re-investing part of the proceeds from the sale in Moeller.

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