Catalyst Buyout Fund 2

Catalyst Buyout Fund 2 is managed by Sydney based Catalyst Investment Managers Pty Limited. Catalyst Investment Managers ( established in 1989 are one of the most experienced private equity firms in the Australasian market having completed 32 management buyouts (MBO’s) in Australia and New Zealand, with a combined enterprise value of almost A$3 billion.

Catalyst invests in market leading businesses, with excellent management, robust cash flows and strong growth prospects. Catalyst has developed significant experience in investing in a wide range of industries in Australia and New Zealand including retail, services, building products, packaging and other industrial sectors. Furthermore Catalyst’s current team have delivered top quartile returns across all of the previous funds in which they have been involved.

Well known examples of Catalyst’s previous MBO’s, include;

– Pacific Brands, acquired from Pacific Dunlop in 2001 for A$730 million, and subsequently listed on the ASX for A$1.725 billion in 2004.

– Just Group, acquired from public shareholders in 2001 for A$125 million, and subsequently re-listed on the ASX for A$573 million in 2004.

Catalyst Buyout Fund 2 (which is the current team’s fifth fund), has a total size of $438m and is focussed on investing into mid-market buyout opportunities of profitable, Australian & New Zealand businesses, with enterprise value of between $100 million and $500 million at investment.

Investments completed to date by Catalyst Buyout Fund 2 include Actrol Parts, Adairs & Dusk, Morris Corporation, Bhagwan Marine, Cirrus Media & Heat to Eat Holdings.

Actrol Parts. In March 2010, Catalyst Buyout Fund 2 acquired the Actrol Parts business from GSA Group. At the time of acquisition, Actrol was the second largest wholesaler and distributor of equipment, gas and parts to the refrigeration and air-conditioning market in Australia. It had been in operation for over 70 years and grew primarily through the acquisition of a number of smaller, independent, regional players.

In December 2010 Actrol Parts acquired AC Components, the market leading Victorian distributor of heating, ventilation and air-conditioning (HVAC) components and units. Combined with Actrol Parts, the business became the leading HVAC and refrigeration wholesaler in Australia.

Actrol has a national presence with 79 branches across Australia, five distribution centres and a gas plant, with its primary customers being refrigeration and air-conditioning contractors.

Actrol’s revenue improved significantly under Catalyst’s ownership, with sales posted for the 2013 fiscal year of $240 million, up from about $110 million when Catalyst bought the business

In December 2013 Catalyst announced that a binding agreement had been reached for the sale of 100% of the shares in Actrol to listed plumbing group Reece, for $280 million. The sale was completed in late January 2014 with the net proceeds of the sale distributed to Catalyst Buyout Fund 2 investors including VPEG soon after, delivering a strong return to VPEG over it’s original investment.

Adairs & Dusk. During December 2010, Catalyst Buyout Fund 2 purchased a controlling stake in two specialty retail concepts, Adairs & Dusk.

Adairs is a specialty retailer in the broad homewares space, with a particular focus on manchester. The business is headquartered in Melbourne and currently has 107 stores across Australia. The business operates 4 sub concepts – Adair’s (regular), Adair’s Homemaker, Adair’s Kids, and Urban Home Republic. The Adair’s business is the largest specialty retailer in its category.

Dusk is specialty retailer in the candles and home fragrance homewares niche. Dusk currently has 74 stores across Australia, and is the largest player in its market. Dusk stores are typically small in size (approx 100m²) and are mainly located in large shopping centres or high end strip locations.

During February 2015, HDH was restructured to separate the Dusk business from the group. Simultaneously the remaining group (including Adairs) was refinanced in preparation for an IPO.

Adairs (ADH) commenced trading on the ASX on 17th June 2015 with an initial issue price was $2.40 per share. The IPO priced at 16.3 times FY16 net profit after tax providing an Enterprise Value for the Company at just over $438 million.

Since listing, Adair’s shares have performed solidly in the aftermarket and have consistently traded above their issue price.

The remaining 29.1% of Adairs’ shares held by Catalyst is under an escrow arrangement until the release of the company’s FY17 result.

The proceeds received to date by VPEG represent a good multiple of VPEG’s initial share of the investment in Adairs, providing another strong top quartile return to VPEG from this exit.

On 21 February 2020, Adairs Limited (ASX: ADH) provided shareholders with the company results for the first half of FY20. During the period 1 July 2019 to 31 December 2019 the company reported strong sales and profitability, accompanied with a number of key strategic initiatives including the acquisition of Mocka (December 2019) and the finalisation of the company’s domestic supply chain strategy.

The market responded positively to this news, with the ADH Share Price increasing by 8% to $2.59/share. With the results being well received by the market, Catalyst Buyout Fund 2 (CBF2) subsequently sold their remaining 11% shareholding in Adairs via a block trade, through JP Morgan Chase & Co, following market close on Friday 21 February 2020, at an agreed price of $2.57/share, which represented a 0.8% discount to the end of day share price.

Settlement of the share sale was completed on Wednesday 26 February 2020 completing the exit of CBF2’s investment in Adairs, which has delivered a top quartile return for CBF2 investors, including VPEG.

Following the sale, CBF2 distributed a total of $800,000 to VPEG on 2 March 2020 for its share of the net investment proceeds. Following the receipt of this distribution, VPEG directors along with the approval of shareholders at the General Meeting held on 25 March 2020, agreed to a Return of Capital distribution of $799,431 ($0.0226 per share) which was paid to all VPEG Shareholders on 9 April 2020.

On 2nd November 2020, Catalyst Buyout Fund 2 successfully exited investee Dusk through way of IPO (ASX: DSK) with Catalyst selling down 60% of the funds pre IPO shareholding upon listing. 

Under Catalyst Buyout Fund 2’s ownership Dusk became Australia’s leading specialty retailer of candles, home fragrance and giftware products, with over 90 stores and sales in excess of $100m.  

The IPO was priced at 10.0 x September 2020 Last Twelve Months Net profit after tax, and valued the Company at a $120 million Enterprise Value, with an indicative dividend yield of 7%. 

The IPO delivered a robust distribution to Catalyst investors on 11 November 2020 with VPEG’s share of the net sell down proceeds equating to $700,000. VPEG expects to distribute this return to all Shareholders in early 2021. 

Morris Corporation. In December 2011, Catalyst Buyout Fund 2 acquired a significant shareholding in Morris Corporation.

Morris Corporation is a remote facilities management business specialising in delivering industrial hospitality, including catering, accommodation and facilities management services to the remote resource, construction and defence sectors.

Morris supports a number of key projects throughout Queensland and Western Australia, New South Wales, Northern Territory and within international war zones.

During August 2017, Catalyst Buyout Fund 2 announced the asset sale of Morris’ contracts division and Collinsville Village to Sodexo, a large French facilities management company and one of the leading players in the Australian remote facilities management sector. The acquisition will significantly expand Sodexo’s market share in Australia with Morris’ presence in the Eastern States completing Sodexo’s existing footprint in Western Australia.

All major contract preconditions were met and the sale was finalised on 31 October 2017.

Bhagwan Marine. In February 2012, Catalyst Buyout Fund 2 acquired a significant shareholding in Bhagwan Marine and provided additional capital for the future growth of the business.

Bhagwan is one of the pre-eminent service providers to the offshore Oil & Gas industry in Australia. The business has been operating in the sector since 1998 and now has a
strategic presence in the key port locations in WA, NT & QLD.

Bhagwan focuses on the provision of manned vessels to service Oil & Gas owner operators and contractors and is the market leader in the shallow water (port services) and shallow offshore (<50m depth) vessel space.

The business currently operates 50 vessels and has access to the best trained and knowledgeable marine personnel in the industry.

Cirrus Media (Formally Reed Business Information Australia). During January 2013, Catalyst Buyout Fund 2 completed the 100% acquisition of Reed Business Information Australia (RBIA) from US based Reed Elsevier.

Cirrus Media is one of Australia’s leading B2B publishers and information providers, with magazines including Australian Doctor, New Scientist, B&T Weekly, Travel Week and many other market leading publications.

Cirrus Media’s extensive product range comprises of magazines, supplements, directories, and online industry portals and e-newsletters. They provide a mix of print, online and direct marketing opportunities. RBIA has also developed the some of the most advanced internet portals in the B2B industry including “Hotfrog” a strong contributor to the overall business.

Heat to Eat Holdings In late September 2013, Heat to Eat Holdings was established by Catalyst Buyout Fund 2, to acquire via management buyout, Vesco Food Holdings (“Vesco”) and Cook Freeze (trading as Prepared Foods Australia “PFA”). The simultaneous acquisition and merger style transaction was completed in early November 2013.

Perth based Vesco Foods is one of Australia’s leading manufacturers of frozen meals and meal components. Using more than 1,500 different ingredients and producing an extensive range of over 300 products, Vesco Foods has built its foundation on traditional philosophies of excellence in quality, service and value.

Since 1974, Vesco Foods has evolved into the innovative and progressive manufacturer it is today, supplying prepared frozen lasagne, complete meals, meat casseroles and sauces to many leading national and international brands, retail outlets and food service clients in Australia, Asia and the Middle East.

PFA is a Brisbane based producer of frozen ready meals and components which currently serves the adjacent Health & Food Service channel. PFA’s operating facility, based in Wacol, Queensland, was
originally built in 1980 to supply frozen meal solutions to hospitals and other institutions, which remains an important market for PFA today.