CVC Capital Looks to Taking Minority Stake in German Fleet-Services Firm--Update

By Eric Sylvers and Ben Dummett 

Private-equity firm CVC Capital Partners agreed on Friday to buy a minority stake in DKV Mobility Services Group, as buyout firms continue to show a desire to broaden their investment strategies.

CVC and the private German fleet-services company didn't report the value of the deal. The Wall Street Journal earlier reported the pact would value DKV at about EUR2 billion ($2.27 billion), including debt.

European-based CVC said it will take a 20% stake and let the current management continue. DKV's family owners will hold 80% of the company.

DKV, which had EUR7.2 billion of revenue last year, issues cards that are used by commercial drivers to pay for fuel, toll and other services in more than 40 European countries without having to carry cash. It has more than 900 employees, according to its website.

Traditionally, large private-equity firms such as CVC tend to buy companies outright. They bet on cost-cutting and other measures to improve the operations over three to five years with the aim of generating outsize returns from a subsequent sale or initial public offering of the business.

But the CVC-DKV deal reflects efforts in recent years within the buyout industry to diversify investment strategies. Amid increased competition, cash is being deployed to acquire or invest in assets, such as family-controlled businesses, whose owners previously hesitated to sell to private equity.

Historically, family-controlled businesses such as DKV have been reluctant to sell to investment firms on concerns that such a move would spur job cuts and other belt-tightening measures.

"Family businesses are still very important in Europe and it's important for them to have access to capital," said Richard Burton, head of financing and advisory at UniCredit SpA, which with Commerzbank AG advised the seller.

Royal Bank of Canada advised CVC.

CVC, in recent years, has broadened its approach to use partnerships as a way of funding investments in companies, working with the existing management to ensure the operation's continuity. In June, CVC struck a deal to acquire a majority in Italy's Recordati SpA from the pharmaceutical company's controlling family in a deal valued at EUR3.03 billion. In another deal this summer, CVC joined industrial-gases company Messer Group to acquire the majority of Linde AG's gases business in North America along with certain business activities in South America.

Write to Eric Sylvers at [e-mail] and Ben Dummett at [e-mail]

(END) Dow Jones Newswires

November 16, 2018 16:36 ET (21:36 GMT)

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