Archer Capital Fund 4

Archer Capital Fund 4 is advised by Sydney based Archer Capital (www.archercapital.com.au) who are a leading Australian private equity manager specialising in leveraged buyouts.

Since 1996, Archer Capital’s Partners and executives have closed over 20 acquisitions involving total aggregate funding in excess of $3.3 billion. Archer is one of Australia’s most experienced leveraged buyout managers with each of Archer’s previous funds having achieved top quartile returns for their respective vintage years.

Archer Capital is unique in the Australian buyout industry in that their team possesses significant operational and general management experience. Archer Capital executives have a mix of FMCG, retailing, manufacturing and distribution line management experience.

A hands-on, operational approach is an essential part of Archer Capital’s investment process from investment assessment to ongoing investment management. Archer believe their operational experience, combined with their expertise in funding and structuring deals, allows them to be much better equipped as partners and custodians in the management of operating businesses.

Investments made by Archer Capital Fund 4 include Amart All Sports / Rebel Sport, iNova Pharmaceuticals, The Cellarmasters Group, MYOB, Funtastic Limited, Ausfuel, DairyWest, V8 Supercars, Healthe Care and Quick Service Restaurants Holdings.

Amart All Sports / Rebel Sport. Archer completed the Management Buyout of leading Queensland sporting goods retailer, Amart All Sports, in August 2004. A mix of new stores and a bolt-on acquisition has seen the network expand nationally from 26 to in excess of 70 Amart stores.

The acquisition of Rebel Sport during March 2007, added more than 60 stores to the network creating the largest sporting goods retailer in Australia. Archer’s focus is for further network growth and operational improvement to enhance profitability, prior to exit.

In October 2011 the Rebel Group was sold by Archer Capital to ASX listed Super Retail Group for $610 million, delivering a strong return to investors in the relevant Archer funds.

At the time of the sale, the Rebel Group consisted of 90 Rebel Sport stores, 36 A-Mart Allsports stores, and two Performance Sports stores. Rebel generated $603 million of revenue in the 2011 financial year.

iNova Pharmaceuticals. In December 2006, Archer co-led a $450m+ acquisition of iNova Pharmaceuticals (formerly 3M Pharmaceuticals in Asia Pacific and Africa). iNova Pharmaceuticals aims to create and deliver innovative pharmaceutical products, which improve the lives of patients by meeting their needs. The company develops and supplies a range of prescription and over the counter medicines including drugs to treat skin cancer, heart conditions, weight loss, asthma, coughs, sore throats and sports injuries.

iNova Pharmaceuticals has manufacturing and laboratory facilities in Thornleigh, Australia, and distributes its products to South Africa and throughout the Asia-Pacific region including Australia, New Zealand, Malaysia, the Philippines, Thailand, Singapore, Japan, South Korea, China, Taiwan and Hong Kong.

In December 2011 iNova Pharmaceuticals was sold by Archer Capital to Canadian based Valeant Pharmaceuticals International Inc, a multinational specialty pharmaceutical company.

Valeant paid A$625 million as an upfront payment to Inova shareholders, including Archer Funds 3 & 4, who will also be entitled to receive potential milestone payments of an additional A$75 million over time, depending on pipeline success.

The Cellarmasters Group. In June 2007, Archer Capital Fund 4 acquired the Australasian Wine Clubs and Services Businesses from Fosters Group Limited. The acquired businesses include Cellarmasters Wines and Vinpac International in Australia, Cardmember Wines and Carters in New Zealand and a 50% investment in the Wine Buzz operation in Japan.

Cellarmasters and Cardmember are the largest wine club businesses in their respective countries and between them sell approximately 1.2 million cases of wine per year. The Vinpac and Carters businesses provide bottling services and supplies to wineries and are market leaders in their respective markets.

During May 2011, Archer Capital Fund 4 sold the Cellarmasters Group to Woolworths Ltd for an enterprise value of A$340 million.

The direct-to-home business of Cellarmasters will be added to Woolworths existing liquor retail brands: Dan Murphy’s, BWS, Woolworths Liquor and Langton’s.

Funtastic Limited. In May 2008 Archer Capital Fund 4, as part of a consortium, acquired an 18.8% share of ASX listed, Funtastic Limited and launched a bid to acquire 100% of the company. Funtastic is Australia’s largest marketer and distributor of children’s products. Following extensive due diligence, the buyout did not proceed and Archer subsequently sold all their shares in Funtastic over time.

MYOB. In January 2009 Archer Capital Fund 4, in consortium with one of its investors, acquired ASX listed MYOB Limited and subsequently de-listed the shares of the company.

MYOB is a developer and publisher of business management software and provides award-winning software, services and support to over 700,000 businesses and 10,000 accounting practices across the Asia Pacific region.

MYOB also works directly with accounting practices to streamline their processes and maximise their productivity. MYOB solutions are used by leading accounting practices from tax agents and sole practitioners to the “Big 4″ accounting firms.

In August 2011 MYOB was sold by the Archer consortium to Boston based private equity firm Bain Capital, for a reported enterprise value of approximately $A1.2 Billion.

Across their period of ownership Archer worked with management to grow earnings by increasing revenue, reducing costs and growing MYOB’s customer base with the introduction of new product offerings.

The Bain deal valued MYOB at about 11.3 times earnings before interest, tax, depreciation and amortisation. It was reported that the sale represented a more than threefold return on Archer’s original investment in a little over two and a half years.

Part of the proceeds from the MYOB sale was to be received in the form of a Payment-In-Kind (PIK) Note to be redeemed on 31st March 2017. During May 2015, Archer Capital Fund 4 completed the successful negotiation of an early repayment of this debt security resulting in a higher net benefit to Archer investors, including VPEG.

On 15 May 2015, VPEG received additional distribution proceeds from Archer 4 for the MYOB PIK note redemption, which was triggered by the IPO of MYOB, by its current owners Bain Capital, in early May 2015.

Ausfuel. In May 2010 Archer Capital Fund 4 acquired a significant majority of Darwin (Australia) based Ausfuel.

Ausfuel is a leading energy distribution company with operations in fuel retailing (service stations), commercial fuels distribution and fuels transportation. The company has delivered fuel and lubricants across regional and remote Australia for more than 25 years.

The Company has operations mainly in the Northern Territory servicing remote regional areas, with additional reach into South Australia, Queensland and Western Australia. The company’s offices are located in Darwin, Brisbane, Katherine, Alice Springs, Cloncurry, Townsville, Charleville, Quilpie and Kununurra.

At investment Ausfuel’s network included 20 owned and operated service stations and more than 100 resellers and they directly employed 400 staff including 130 casual console operators.

Toward the end of 2010 Ausfuel acquired Gull WA the leading independent fuel retailer in Western Australia.

Gull’s retail business consists of 98 branded sites (78 “Gull” & 20 “Peak”), operated under a mixture of company owned, commission agent and reseller arrangements. Gull’s commercial operations concentrate on large volume, low margin business which currently outsources its transport requirement to a local distributor.

In February 2013 Archer Capital sold Ausfuel to Puma Energy a subsidiary of Dutch independent commodity Trader Trafigura Beheer B.V., in a deal that media reported was worth up to A$650 million.

The sale delivered a strong top quartile return to Archer Capital Fund 4 investors including VPEG.

DairyWest. In March 2011 Archer Capital Fund 4 acquired Brownes Foods Pty Ltd from Fonterra.

Established in 1886, Brownes is Western Australia’s leading dairy business, processing 38% of the state’s milk into a full range of white milk, flavoured milk, yogurt and dairy dessert products as well as commodity cheese.

Brownes has more than 300 employees and operates a broad distribution network servicing 4,200 customer points which are serviced 6 days per week, via 17 depots supporting more than 50 distributors.

During December 2017, Archer Capital Fund 4 completed the sale of DairyWest Group (trading as Brownes Dairy), Western Australia’s leading dairy producer, to a Chinese consortium led by Shanghai Ground Food Tech Co. Ltd. Tony Girgis head of the existing management team says “This deal is a significant step in positioning Brownes for growth well into the future and we are excited at the opportunities offered to the business, our suppliers, employees and consumers.”

V8 Supercars. In May 2011 Archer Capital Fund 4 acquired a majority interest in V8 Supercars Australia.

V8 Supercars (V8SC) is the Asia-Pacific’s premier motors sport category, and one of the leading touring car competitions globally. Annual events consist of 29 races over 15 weekends, across every state of Australia, plus New Zealand and the Middle East. Currently there are 28 cars in 17 teams competing, with Holden and Ford the only manufacturers.

The business has expanded rapidly since its foundation in 1997, and has a strong and passionate fan-base around the country. In 2010, total attendance at V8 Supercars events was c. 1.7m people.

V8SC events are the largest annual event in the states and territories of Australia in which they are run (all states and territories except the ACT). Interest in the sport is strong, with tv-viewership being the fourth highest of any sport in the country.

On a national basis (i.e. excluding region-focused football codes), the sport ranks second behind cricket.

The injection of funds will be directed towards expanding the international reach of the series by increasing the championship to 18 rounds by 2015 and through international media rights across a variety of platforms.

Healthe Care. During June 2011 Archer Capital Fund 4 acquired a significant majority of shares in Hospital operator Healthe Care.

Since establishment in 2005, Healthe Care has grown to become the largest privately owned and third largest for-profit hospital operator in Australia with approximately 1,000 beds and 36 operating theatres. Healthe operates 12 private hospitals (10 acute and 2 psychiatric hospitals) across New South Wales, Queensland, Tasmania, and Victoria.

During 2009 and 2010, Healthe Care committed significant funds to redevelopment projects across a number of its portfolio hospitals including Gosford Private Hospital, Currumbin Clinic, Maitland Private Hospital, Lingard Private Hospital and South Eastern Private Hospital, increasing bed capacity, theatres, medical consulting suites, parking and improving unit facilities. Further, the Group has undertaken extensive refurbishment of patient accommodation and added additional services including an emergency referral centre at Gosford Private Hospital.

The company also provides a range of outpatient services, including community nursing in the Hunter and Central region of New South Wales as well as workplace health services in Canberra and Melbourne.

On 6 December 2015, Archer announced that Healthe Care had been sold to Luye Medical Group.

Luye Group has a network of healthcare facilities across major cities in China as well as a significant shareholding in Luye Pharma Group, a leading Chinese pharmaceutical company with an approximately A$4 billion market capitalisation on the Hong Kong stock exchange.

Under Archer’s ownership, Healthe Care grew to become the third largest private hospital operator in Australia and one of the country’s largest privately-owned healthcare companies. At the time of the sale Healthe Care operated a portfolio of 17 hospital sites located in major cities and key regional areas across Australia. The company had over 1,800 beds, more than 50 operating theatres and 4,500 employees.

The news media (AFR & The Australian) reported that Healthe Care had been sold to Luye Medical Group for $938m. The transaction was completed in March 2016 with VPEG’s share of the sale proceeds received in April 2016, delivering VPEG a strong top quartile return from this exit.

Quick Service Restaurant Holdings (QSRH). During June 2011 Archer Capital Fund 4 and the senior management team of Quick Service Restaurant Holdings acquired 100% of QSRH.

QSRH is a franchisor and operator of over 620 quick service restaurants under the Red Rooster, Oporto and Chicken Treat brands. The three brands that make up QSRH have combined operational experience in excess of sixty years and employ more than 18, 000 people in its restaurants located across Australia, the United Kingdom, New Zealand and China.

The combination of the Red Rooster, Chicken Treat and Oporto brands provides a very strong, diversified quick service restaurant network across Australia. The three businesses represent complementary brands, geography, customer demographics and growth profiles.

Today 72% of QSRH is under franchise operation which is a significant change from 2007 when the Group had a majority of corporate store operations (78%).

The Group has aggressive growth plans for the future which will include the development of new stores and an extensive refurbishment program.