3i makes over five times its money on Encon

24 Oct 2005

3i, Europe's leading private equity company, has sold Encon, one of the UK's leading specialist distributors of insulation products, to Wolseley plc, the global leader in heating and plumbing supplies and a leading supplier of building materials, in a deal worth £140.5m.

The sale will complete 3i's exit from the Encon group which it acquired, alongside its management team led by CEO Douglas McKerracher, in late 1997.  3i's proceeds represent a money multiple of 5.8 times its original investment cost and an IRR of 30%.

Ken Beaty, 3i Director commented: "Since we led the MBO of Encon in the late 1990's, the business has delivered consistent year on year growth.  Increasing government legislation surrounding energy insulation has led to strong market demand in recent years and this is set to continue.  This transaction allows 3i to realise the value created during the life of our investment, whilst allowing Encon to become part of an international organisation with extensive synergy opportunities. We are delighted with the fantastic return we have made on this investment and wish Douglas and his team all the best for the future success of the business."

Encon, based in Wetherby, West Yorkshire, is the second largest specialist insulation distributor in the UK, supplying insulation, dry wall and related products to the construction industry. Currently the business operates from 22 depots in 18 locations and has a turnover of £170m.  The business has grown substantially in recent years, benefiting from market growth led by government legislation and increased demand for basic insulation products.

In 1997, 3i backed a secondary MBO of Encon valuing the company at £35 million.  At that time the group consisted of two principal businesses; the Encon distribution business and the Superglass insulation manufacturing business. In 2003 Encon contracted to sell Superglass to Knauf Insulation but the transaction was prohibited by the UK Competition Commission.  Subsequently, Superglass was sold to NBGI Private Equity in August 2005 for £37.5 million. The sale of the Encon distribution business (including its contracting business) for £140.5 million brings combined sale proceeds to £178 million and represents a complete exit from the group for 3i.  During the life of the 8 year investment, 3i has taken an active role in the strategic direction of the business including appointing Jim Cooper as chairman of the board and Ken Beaty, 3i Director, as a non executive director on the board.

Douglas McKerracher, CEO of Encon added: "3i has been a valued investor over the last 8 years and has supported the development of the group.  I am delighted that the shareholders have been able to realise their value whilst at the same time we look forward to the next stage of the group's development.  There are many exciting market opportunities to pursue under Wolseley's ownership."

Lead advisor on the deal was Rothschild's Leeds office (David Wilton, Stephen Griffiths and James Collier).  David Wilton commented "We are delighted to have secured such an excellent result for the shareholders, initially selling Superglass and now Encon.  We wish the management and employees of both businesses all the best for the future."

Legal advice to the shareholders of Encon was provided by Eversheds, Leeds - partner Keith Froud.

Notes to editors

About 3i
3i is a world leader in private equity and venture capital.  We focus on buyouts, growth capital and venture capital and invest across Europe, in the United States and Asia.

Our competitive advantage comes from our international network and the strength and breadth of our relationships in business.  These underpin the value that we deliver to our portfolio and to our shareholders.  www.3i.com

3i Buyout Business
The 3i European Buyout Business is a leader in the European mid-market. 3i lead mid-market buyouts up to €1bn using insight from local knowledge, international connections, and sector teams. Managing over €3.5bn invested in over 100 companies across Europe, the business invests in all sectors, with a particular focus on media, healthcare and business support services. Recent investments include NCP - UK - £550m - parking services and traffic management, Keolis - France - €540m - passenger transport, Betapharm - Germany - €300m - pharmaceuticals. Recent successful exits include Westminster Healthcare - UK - €751m, Travelex - UK - foreign exchange services - £1bn, YBR Group - directories - €1.8bn - Local Press - newspaper publishers - £65m.