Simcro bought as Gresham calls it quits
PRIVATE EQUITY firm Riverside Company’s buyout of Hamiltonbased veterinary technology company Simcro last week is a rare sign of life in a stuttering private equity market.
United States-based Riverside, which invests in companies with an enterprise value up to US$250 million (NZ$318m) and has US$3.5 billion under management, this month bought the New Zealand maker of drugdelivery systems for animals just as another major trans-Tasman private-equity player exited the market altogether.
Investment house Gresham Partners is calling it quits on private equity after falling victim to poor initial public offering markets and losing money on key investments, including a loss on trans-Tasman printing company GEON, which was placed in receivership and sold off in bits earlier this year.
A key Gresham executive, Mark Youens, is leaving, while a sale is on the cards for one of the firm’s few remaining businesses, tourism operator the Tasmanian Walking Company.
Head of Riverside in Australia Simon Feiglin said weak business confidence meant that it remained difficult to find people willing to sell their business, but funding was increasingly available for firms such as Simcro with strong track records.
Riverside has bought just over two-thirds of the company in what was its first New Zealand investment. Westpac is providing debt financing for the transaction.
Simcro was founded in 1993 and was acquired by three Auckland-based investors in 2007. These included current chief executive Will Rouse and director of research and development Rod Walker, both of whom remain with the company and continue as shareholders.
The 2012 TIN 100 report on New Zealand technology companies estimated Simcro’s revenue at $21.4m and its staffing at 85.
Its customers are global pharmaceutical companies which package its devices so customers can administer vaccines and other medications. Tellingly, the multiaward-winning Simcro is now piloting its first drug-delivery project in human health.
Gresham, part-owned by listed conglomerate Wesfarmers, has had a private equity business for 14 years, but recent difficulties in divesting assets appear to have reduced its appetite for further deals.
Youens, who has been co-head of the private-equity division since 2010, will leave at the end of September. While his fellow cohead, Mark Rimmer, will stay on, money committed for Gresham’s third private-equity fund is probably not going to be deployed.
Gresham Partners chief executive Charles Graham said a sale of the Tasmanian Walking Company was expected to occur about September, but Gresham would wait until market conditions improved before divesting its biggest asset, mining service firm Barminco, and its other asset, Silk Logistics.
Graham said it was more accurate to say the private-equity business was in divestment stage rather than a wind-down.
‘‘The market has certainly become tougher on the exit,’’ Graham said.
‘‘There’s been a reduction of mergers and acquisitions activity. commitments for its fifth fund with a target of A$2b.
In the mid-tier firms, times have been hard. Westpac Banking Corp and ANZ Banking Group liquidated their private-equity portfolios after the crisis.
Gresham’s second privateequity fund raised A$325m in 2004, but its investment record has been mixed. Its first deal was a nappy business called APPP it bought for A$75m of equity and debt in 2005 and it sold it three years later, netting a handsome return of 4.4 times what it had invested.
But that was the high point for Gresham’s fund No 2, with other assets in the retail, printing, tourism and mining services sector exposed to deteriorating market conditions.
Gresham spent A$170m buying fashion labels Witchery and Mimco and after a tortuous sales process the business changed hands for just A$172m, although investors did see their money double thanks to the business carrying less debt.
Gresham lost money on GEON and it has had major headaches over how to divest itself of mining services firm Barminco.
Having bought a majority stake in Barminco in 2007, Gresham has made two unsuccessful attempts to float the business.
Because of choppy listings conditions, the latest attempt was shelved late last year and Gresham has since changed tack by securing an A$485m five-year loan, for which it is paying interest of more than 9 per cent.
Graham said there was now no rush to sell Barminco and the strategy instead would be to continue to grow the business.