Equity Partners Fund No. 3

Equity Partners (www.equitypartners.com.au) were formed in 1995 and commenced fund raising soon after for their first Venture Capital (VC) fund. By 2000 Equity Partners had approximately $140m in commitments under management with the majority of those commitments targeting expansion stage investments into businesses with revenues in the range $5m to $50m.

Since turning their focus from a mixture of VC and expansion stage investing to that of only expansion and buyout investing into profitable businesses during 2002, the team at Equity Partners have been able to demonstrate a strong track record of generating top quartile returns for investors.

Furthermore the expansion and buyout investments led by Rajeev Dhawan (a Partner at Equity Partners since 2004), while at Colonial First State Private Equity (CFSPE), have also demonstrated top quartile performance.

Equity Partners Fund No. 3, with a fund size of $76m, focusses on investing into small to lower mid market buyout and expansion capital opportunities in profitable, predominately Australian businesses, with enterprise value of between $20 million and $80 million at investment.

Equity Partners Fund No. 3 investments to date include; Skins Consolidated Pty Ltd (Skins), HRV / E-Co Products Group Limited (HRV), Australian Naturalcare Products, Aussie Farmers Group and Tasman Market Fresh Meats.

Skins is a leading designer and marketer of a range of sports apparel in the rapidly growing compression products market. The Skins brand is recognised in Australia as the premium product in the compression category, providing improved performance and recovery for sports participants of all levels.

The investment by Equity Partners completed in December 2007 provided expansion funding to facilitate the continued development of the Skins international expansion plans.

The Skins business grew rapidly during Equity Partner’s investment, to become the dominant player in the Australian market, while also establishing global infrastructure to accelerate its offshore expansion program. During the period of EP3’s investment Skins annual revenue grew more than 300% from US$16m to US$50m.

In late March 2012, Equity Partner’s announced the sale of their 36% shareholding in Skins to Skins management and Japan’s Itochu Corporation for a more than $US30 million.

Itochu, has a market value of $US18.15bn and operates brands including Babolat, Fila, Converse, Haed, Lanvin, Paul Smith, Vivienne Westwood, Paul Smith and LeSportsac. The company’s brand partnerships extend into specialty food chains including Belgium’s Le Pain Quotidien and New York’s Dean & Deluca.

The investment in Skins enabled Itochu to acquire mutually exclusive supply and distribution rights for Skins in Japan, China, South Korea, Taiwan, Hong Kong and Macau.

The sale of Equity Partners shares in Skins was completed on 4 April 2012. The net proceeds of the sale distributed to investors including VPEG in early April 2012, were 41% above the December 11 holding value for Skins.

The proceeds represented a 24% IRR over the 4.3 year period of the investment, generating a more than 2.4 X cost of initial investment of investors.

HRV provides an integrated product offering consisting of design, supply, installation, finance and ongoing maintenance of positive pressure home ventilation systems in New Zealand and Australia.

The positive pressure home ventilation system continuously recovers warmer, drier air from ceiling cavities which is then filtered and forced through living spaces such that purified air displaces stale moist air in the home. The key benefits of the system include improvement in home air quality, control of condensation and improved energy efficiency.

The company has a national franchise network in NZ, complemented by an emerging presence in Australia. Since commencement, HRV has installed more than 60,000 units in NZ homes with more than 1,000 units installed in homes in Victoria (Australia) since July 2008.

On 31 March 2017, Equity Partners 3 ‘EP3’ sold its interest in New Zealand based investee E-co products (formely HRV) in a trade sale to New Zealand Exchange listed, Vector Limited (VCT). Vector is New Zealand’s leading energy solutions com[any, delivering energy and communication services and is the largest distributor of electricity and gas, owning the lines and pipes to households and businesses across Auckland.

VPEG received its share of the total amount distributed by EP3 on 7th April 2017. The remaining proceeds from sale have been retained in Escrow and will be released upon settlement to the retention period.

The final proceeds from the sale delivered a strong multiple of investment for EP3 investors including VPEG, over the approximate 7 year investment period.

Australian Naturalcare Products. During April 2011, Equity Partners 3 acquired a majority shareholding in Australian Naturalcare Products (ANCP).

ANCP is a direct marketer of own branded vitamins and complementary health and wellbeing products predominantly via the direct mail channel in Australia. ANCP was established in 1989 and has since grown to become a leading player in the market with a national operational footprint, established direct marketing platform, growing product portfolio and a loyal active customer base.

ANCP’s product portfolio consists of approximately 75 TGA accredited ANCP branded vitamin products and a range of complementary health and wellbeing products (e.g. aged care appliances and nutraceutical skincare products). ANCP owns the intellectual property including the product formulation specifications and related know-how for all of its vitamin products.

Aussie Farmers Group (AFG) is a vertically integrated fresh food home delivery business, comprising both retail franchise operations together with wholesale businesses, that operates nationally. It is also a market leader in the Australian “direct to home” fresh food market.

AFG commenced operations in Victoria in September 2005. The company has since grown rapidly to become a leading player in the niche “direct to home” fresh food market with a proven business model characterised by a national franchise network, wholesale operations in key product verticals and an active and loyal customer base of over 100,000 people.

Amalgamated Hardware Merchants. On 1 August 2019, Equity Partners Fund 3 completed the sale Amalgamated Hardware Merchant (AHM) to Kiwicare, a New Zealand company specializing in developing and distributing pest control, garden care and outdoor cleaning products to major and individual retail outlets, government, landowners and professional operators throughout New Zealand.

Equity Partners Fund 3 acquired a majority shareholding in AHM in December 2012. Established in 1980, AHM is a sales and distributor of mainly its own branded gardening, camping, outdoor and home improvement products in the hardware / home improvement market in New Zealand and Australia.

Key banner brands include “McGregor’s”, “Campmaster” and “Atlas”. The products are sold via a well established and diversified distribution network consisting of big box retailers, discount department stores, specialty retail stores and independent retailers.

Tasman Market Fresh Meats. On 26 August 2013, Equity Partners Fund 3 completed the acquisition of a majority shareholding in Tasman Market Fresh Meats (“TMFM”).

TMFM is a specialty retailer of meat and complementary food products via a network of 15 “big-box” format destination stores in Victoria which include metropolitan Melbourne as well as stores in Geelong and Shepparton .

The company prides itself on the freshness, quality, variety and value for money that their products provide. TMFM’s meat is 100% Australian grown and is mainly sourced from Victoria. All meat is delivered fresh daily to their stores where it is prepared and packed on site. TMFM carry a full range of quality yearling beef, choice cuts of lamb, a full range of pork, chicken and other poultry lines as well as game and veal. They also sell bulk meat including full cryovac pieces.

In addition TMFM carries a wide selection of complementary grocery, frozen and deli products and a range of Italian products that they have exclusively imported. TMFM has a positive growth outlook underpinned by its sustainable competitive advantages in supply chain and yield optimisation. TMFM has exhibited strong growth, driven largely by new store openings and like for like growth of the existing stores.

As a result of the sale of this final underlying company in Equity Partners Fund 3, the fund has now been subsequently been wound up with a distribution of the final fund proceeds to be received by VPEG during the December 2019 quarter.