Case studies

November 2006

Buyouts

Chorion New investment - UK - Media

In May 2006, 3i and funds completed the This strong relationship with Waheed Alli acquisition of Chorion, a UK-based coupled with 3i’s in-depth media sector intellectual property owning, brand creation knowledge, through deals such as and management business, in a €198 Sparrowhawk Media and Pinewood million public to private transaction. Shepperton, secured the investment opportunity. Chorion, previously listed on AIM, generates revenue by charging royalties on The investment in Chorion represented an toy merchandising, book publishing and TV. opportunity to acquire a portfolio of high-quality It operates on a global basis, with a brands which have a proven track record of portfolio which includes well recognised publishing success and which are ripe for classic children’s brands such as Noddy, further development. Chorion has an excellent Famous Five, and the Mr Men, as well as platform from which to expand into new the works of crime writers such as Agatha geographic markets, and a proven Christie (Miss Marple and Poirot) and management team which is well placed to Georges Simenon (Maigret). capitalise on this opportunity with the strategic support and financial backing of 3i. 3i worked exclusively with Chorion’s Chairman Waheed Alli and the incumbent management team, responsible for almost trebling the value of the business since 2002, for nearly a year before the deal completed. Buyouts

Azzurri Communications Realisation - UK - Technology

During the six years that 3i was invested Azzurri made 15 strategic acquisitions and, combined with strong organic growth, a business with revenues of £115 million (for the year to June 2006) was built as a result.

Headquartered in Newbury, Azzurri now has sales and support operations in eight locations across the UK.

In addition to significant strategic support at inception, 3i contributed to Azzurri’s success throughout. The introduction of experienced private equity Chairman Alan Cornish to the management team in 2002 was key to the successful delivery of the complex buy and build strategy. Previously he was Deputy Chairman of another successful 3i investment, the market research company MORI, has been Chairman of 3i-backed Local Press and was NXD of TeleCity plc. In June 2006, 3i and funds sold a combined 75% stake in Azzurri Azzurri was also able to gain substantial Communications, the leading UK contracts from several 3i portfolio companies, converged voice and data communications including Target Express, MORI and NCP company, through a secondary buyout through 3i’s introduction. Finally 3i ran a which valued the company at £182.5 highly-competitive exit process, running a million. 3i and funds’ proceeds from the proposed AIM listing alongside sale sale of £115 million represented an IRR of discussions with trade buyers and private 38% and a money multiple of 4.9 times equity houses, to achieve an attractive exit initial investment. price. 3i and funds invested £25 million in Azzurri Communications over 2 years from June 2000 to back Azzurri’s founder Martin St Quinton. 3i had already built a strong relationship with Martin St Quinton through its “People Programmes” and the plan was to create a buy and build vehicle for the telecommunications reseller market. Buyouts

Refresco Realisation - Netherlands - Consumer

In September 2003, 3i led the €246 million 3i also supported the acquisition of Interfruit, a buyout of Refresco, one of Europe's leading Spanish national juice business, leading suppliers of private label soft leveraging the knowledge and network of 3i in drinks and fruit juice to food retailers. The Spain. market leader in Holland and Germany, Refresco also had a major presence in Alan Peterson, a former CEO of Meyer France and Spain. 3i was able to beat off International PLC, was introduced to the board stiff competition to win the deal because of as Chairman by 3i. He played an active role its strong European food and drink sector in driving the integration of the previously expertise and the breadth of its network. autonomously run group of companies into one single European business. At the time of the investment by 3i and funds, European consumption of private Refresco increased its EBITDA by 42%, label fruit juices and drinks was growing by leveraged its gross margins on products from between 4% and 6% per annum and the 8% to 12% and enjoyed organic growth of 10% leading players were expanding through per annum during 3i and funds’ ownership. acquisition. In April 2006, 3i and funds sold their stake in 3i was attracted by the quality of Refresco's Refresco to an Icelandic consortium consisting management team and their aggressive of Kaupthing Bank, FL Group and Vifilfell buy and build strategy. With the help of Bottling Group for €478 million. The sale 3i's team in Finland, Refresco acquired generated a €116 million profit, a 50% IRR and Finish private-label market leader VIP Juice a 3 times money multiple for 3i and funds over in 2005. a two and a half year period. Growth Capital

CH4 Energy Realisation - UK – Oil and gas

3i originally invested €1.2 million in CH4 By 2006 CH4 was of a scale which made it Energy providing start up capital in attractive to trade buyers. It had built a diverse September 2002 and has been portfolio of infrastructure, exploration, instrumental in driving its growth into a development and production assets, focused successful exploration and production on the UK and Dutch sectors of the North Sea. business. It had also successfully integrated five acquisitions and, from a standing start in Backing a strong management team, 3i January 2006, its Chiswick field was due to was able to add significant strategic value produce its first gas in early 2007. to the business through its sector expertise. 3i funded 36% of all European oil and gas Working closely with the management team, 3i private equity deals from 2003 to 2005 and ran a competitive auction process which manages an investment portfolio of 14 resulted in CH4 being acquired by Venture companies in the exploration and Production plc for €224 million in August 2006. production and service sectors including The deal, a mixture of cash and paper, Vetco International, Energy Development provided 3i with an IRR of 105% and a 7.3 Partners, RBG and Salamander Energy. times money multiple.

3i invested a further €1.9 million in CH4 in Venture Production, one of the UK continental July 2003 to fund a 25% interest in a gas shelf's largest independent operators, was pipeline in the Southern North Sea and €6 itself initially established in 1997 by 3i and million in May 2004 to support the €52 Larry Kinch and was floated on the London million acquisition of ENI’s 37% interest in Stock Exchange in March 2002, returning a 4.7 Markham, a producing gas field in the times money multiple and a 46% IRR to 3i. Southern North Sea. CH4 is an excellent strategic fit for Venture Production both in terms of geography and people. Growth Capital

Renta Corporación Realisation - Spain – Support services

3i was attracted by the opportunity to invest in a company with a unique business model and an outstanding management team in a growing market with high barriers to entry. In the 18 months that 3i was an investor, Renta’s pre-tax profits rose from €26 million to €49 million and Renta also completed its first transactions in the UK and Germany.

In early 2006, 3i and the management team judged the market conditions of both real estate and the stock markets to be optimal for the company to prepare to float and Renta achieved a successful IPO on the Madrid Stock Exchange in April 2006.

The IPO delivered proceeds of €59 million to 3i, a money multiple of 3 times and an IRR of over 130%.

3i invested €20 million in Renta Corporación for a 9.9% equity holding in December 2004. The company is the leading specialist operator in the transformation and repositioning of existing buildings in city centres in Spain.

Originally founded in 1990 by the current Chairman as a real estate broker, Renta identifies buildings in city centres with untapped development potential, purchases and refurbishes them, and then sells them in under a year.

3i was introduced to the business by Atlas Capital, when the management team was seeking a private equity partner that could provide strategic advice and substantial experience in the IPO process, in addition to capital to fund Renta’s ambitious expansion plans. Growth Capital

Vijai Electricals New investment - India – Power equipment

In August 2006, 3i invested $25.8 million in 3i built a relationship with D J Ramesh, Hyderabad-based Vijai Electricals, a leader founder and Chairman and CEO of Vijai, over in the power transmission and distribution the three years prior to investment. 3i has equipment industry. been offered a seat on the board and will utilise its extensive network and contacts to Established in 1973, Vijai is the largest add strategic value, particularly in international player in distribution transformers in India expansion, acquisitions and technology tie-ups. with a market share between 27% and 30% and a clear focus on quality. The company Vijai has provided 3i with the opportunity to is currently expanding into extra high back a market leader with an ambitious voltage power transformers and switchgear management team, well positioned to through technology tie-ups with majors in capitalise on the significant opportunities Japan and Russia, with the aim of presented in this fast growing sector. becoming a full service transmission and distribution player. Vijai is also substantially developing its project business.

The Indian power generation, transmission and distribution sector has seen significant growth in the past few years driven by government spending to sustain economic growth, reforms in central policies, a focus on rural electrification and an increase in power consumption driven by economic growth. Venture Capital

Icera New investment - UK – Electronics, semiconductors and advanced technologies

Prior to investment, 3i had built a relationship with Icera’s founders, led by CEO Stan Boland, over a four year period. Boland is one of the most successful serial entrepreneurs in the semiconductor industry. 3i’s strong track record and in-depth knowledge of the wireless semiconductor market, gained through backing companies such as CSR, TTPCom, UbiNetics and DiBcom, secured it the investment opportunity.

Icera clearly exhibits the key criteria that 3i seeks in venture investing: a disruptive technology, excellent management and a significant market opportunity.

In July 2006, 3i invested $20 million in Icera Inc., the cellular wireless semiconductor company. This later-stage investment involved joining an existing syndicate who have collectively invested over $80 million in Icera.

Icera has developed the Livanto® chip, a disruptive new architecture for cellular phones and cellular datacards. This breaks through the cycle of handset availability lagging infrastructure for new wireless standards. As well as being amongst the first to market with a 3.6Mbps high speed data solution, Icera aims to drive the availability of faster and more complex standards through software upgrades on the same Livanto® device – but without the time and cost of developing, verifying and manufacturing new silicon. Venture Capital

SyChip Realisation - US – Electronics, semiconductors and advanced technologies

SyChip is today in the business of wireless LAN subsystems for personal digital assistants and has been working with large consumer electronics companies, global handheld OEMs and Asian-based ODMs.

SyChip's radio frequency designs are easy to simulate and predictable, thus reducing time- to-market, increasing performance and improving reliability for its customers. It has also has consistently beaten the competition in terms of footprint and power-consumption, crucial parameters in the mobile handset space. Lately, it has launched a voice-over-IP processing engine which is used in Wi-Fi based mobile handsets. In April 2006, 3i portfolio company SyChip was acquired for $140 million by Kyoto- During the time that 3i was involved, SyChip based Murata Manufacturing Company, grew to 71 people located in Dallas, US and in one of the world’s largest electronic Shanghai, China – the latter is an engineering subsystems companies. 3i achieved $23.6 and Asia development centre which was set up million in proceeds on a $10.6 million to serve Asian customers. investment. The company’s first product launch was in SyChip was originally a spin out from Bell- 2001 and the company has achieved Labs/Lucent in New Jersey, US. In 2001, 3i significant revenue growth year over year. led a $7 million series C investment round Sychip is also the recipient of multiple awards, bringing in new investors, with the aim of such as Internet Telephony’s 2005 product of building a global business. the year, Deloitte’s 2005 “Fast 500”, the TiEcon 2005 Emerging Star Award and finalist 3i took a seat on the board of SyChip and for 2005 Red Herring 100. shortly after investment the business was re-located to Dallas, Texas with a small science team remaining in New Jersey. During the course of the investment, a new CEO, George Barber, a veteran manager from Texas Instruments, was recruited. 3i supported the company in further funding rounds in 2003 and 2004.