Management buy-out: DBAG invests in Karl Eugen Fischer

Frank­furt am Main — Deut­sche Betei­li­gungs AG (DBAG) is inves­t­ing in Karl Eugen Fischer GmbH (KEF), the world’s leading company for the deve­lo­p­ment and manu­fac­ture of cutting systems for the tire indus­try. DBAG Fund VII, advi­sed by Deut­sche Betei­li­gungs AG, will acquire the majo­rity of the shares as part of a manage­ment buyout; they will be sold by funds advi­sed by Equis­tone Part­ners Europe. DBAG will initi­ally invest up to €23.5 million for its co-inves­t­­ment. In the target struc­ture, they will in future hold around 20 percent of the shares in the company. Further shares besi­des DBAG Fund VII will be held by the company’s manage­ment. The closing of the purchase agree­ment signed yester­day is sche­du­led for the end of this month. The parties have agreed not to disc­lose the purchase price.

The latest acqui­si­tion marks DBAG Fund VII’s fourth MBO struc­tu­red since the fund’s invest­ment period began in Decem­ber 2016. With a volume of just over one billion euros, it is the largest private equity fund initia­ted and advi­sed by a German private equity company. After four tran­sac­tions, around one third of the invest­ment commit­ments are now committed.

Tire manu­fac­tu­r­ers use the machi­nes produ­ced by KEF (www.kefischer.de) to assem­ble mainly rubber-coated steel wire and fabric layers (so-called calen­de­red cord mate­rial) for tire carcas­ses and tire belts. These layers form the support­ing struc­ture of the tire and give it shape and driving stabi­lity. They are precis­ely cut with equip­ment from KEF machi­nes. Since the deve­lo­p­ment of the first steel cord cutting line in 1970, a “Fischer line” has become a gene­ric name: Nine of the ten most successful tire manu­fac­tu­r­ers in the world now rely on the company’s machi­nes, whose global market share is around 70 percent. Produc­tion takes place at the company’s head­quar­ters in Burg­kunst­adt (Upper Fran­co­nia), where more than 500 of the total work­force of 545 are employed. There is a sales and service company in both the USA and China. In 2017, 83 million euros were turned over.

Cutting systems are crucial for a smooth produc­tion flow. KEF machi­nes are tech­no­lo­gi­cal leaders in this respect: They are charac­te­ri­zed, for exam­ple, by high precis­ion and low mate­rial losses, both important success factors. With a high level of verti­cal inte­gra­tion, KEF ensu­res that the machi­nes adapted to the respec­tive custo­mer requi­re­ments can be deli­vered in the desi­red quality and on time. The company has been working with its custo­mers for deca­des in the deve­lo­p­ment of the machi­nes and is a prefer­red supplier for quite a few tire manu­fac­tu­r­ers. Based on its outstan­ding tech­no­lo­gi­cal posi­tion, KEF is expec­ted to bene­fit from the incre­asing demand for tires and thus for corre­spon­ding produc­tion faci­li­ties. To this end, invest­ments will be made in expan­ding capa­ci­ties in the coming year, for exam­ple with the cons­truc­tion of a further assem­bly shop in Burgkunstadt.

Mecha­ni­cal and plant engi­nee­ring and auto­mo­tive suppli­ers are two of Deut­sche Betei­li­gungs AG’s four core sectors; in the past ten years alone, DBAG has inves­ted in ten compa­nies from these two sectors. “With our expe­ri­ence and focus on invest­ments in medium-sized compa­nies, we are the ideal part­ner for the company,” commen­ted Dr. Rolf Schef­fels, member of the DBAG Manage­ment Board, on the tran­sac­tion. “We see further poten­tial for Karl Eugen Fischer in view of the tire manu­fac­tu­r­ers’ invest­ment plans and market deve­lo­p­ments,” Dr. Schef­fels added.

“Our company has bene­fi­ted from the support of private equity funds since the foun­ding family sold the company more than ten years ago — they have supported our busi­ness,” explains Simone Thies. The commer­cial direc­tor points to the average annual growth of five percent in sales and the number of employees since 2005. He added: “We are sure that with DBAG we will also be able to exploit the oppor­tu­ni­ties that lie not only in market growth, but also in further expan­sion of the service busi­ness in view of the large number of turbi­nes installed.”

Advi­sor DBAG: Gleiss Lutz
DBAG’s compli­ance advice was provi­ded by a Gleiss Lutz team led by Dr. Eike Bicker (lead, part­ner) and inclu­ding the follo­wing lawy­ers: Marina Stoklasa, Domingo de Prada, Dr. Chris­toph Skou­pil (all compli­ance, Frank­furt), Dr. Moritz Holm-Hadulla (part­ner), Dr. Domi­nik Braun, Dr. Vanessa Gehle (all anti­trust, Stuttgart).
At Deut­sche Betei­li­gungs AG, Mr. Florian Döring (Gene­ral Coun­sel) advi­sed on the acqui­si­tion and coor­di­na­ted the process.

Gleiss Lutz regu­larly advi­ses DBAG and other inter­na­tio­nal and natio­nal private equity inves­tors on invest­ments in promi­sing compa­nies, inclu­ding in the area of venture capital.

About DBAG
Deut­sche Betei­li­gungs AG is a listed private equity company. We initiate closed-end private equity funds: DBAG funds enable insti­tu­tio­nal inves­tors to invest in the equity or equity-like instru­ments of unlis­ted compa­nies. DBAG advi­ses and mana­ges these funds. In other words, it seeks out, exami­nes and struc­tures oppor­tu­ni­ties for parti­ci­pa­tion. We nego­tiate invest­ment agree­ments, accom­pany the port­fo­lio compa­nies during the invest­ment period and design the dive­st­ment process. We co-invest along­side these DBAG funds with funds from our own balance sheet. A DBAG share thus provi­des access to a port­fo­lio of unlis­ted compa­nies and, at the same time, to a successful fund advi­sory business.

Our focus is on medium-sized compa­nies. Their busi­ness models and markets are what we have been deal­ing with for decades.