British private-equity firm Electra Partners is selling out of animal tagging company Allflex after 14 years, banking the rewards from ever stricter livestock controls prompted by a string of food scares.
Electra said on Friday it has received a binding offer worth $1.3 billion from private-equity peer BC Partners, amounting to $630.5 million gross proceeds for Electra’s clients (all figures US$).
According to Electra’s website the group first invested $45 million in Allflex 14 years ago as part of a $168 million management buyout from Goldman Sachs.
Proceeds to the listed unit Electra Private Equity will be $398 million, representing a gross return of 15 times the original cost, Electra said. This equates to an internal rate of return – a common measure of private equity returns – of 28 per cent.
“This is a fantastic result for Electra,” analysts at Liberum said.
Electra bought Allflex in 1998 after the European Union tightened food traceability rules in the wake of the bovine spongiform encephalopathy (BSE) crisis.
Subsequent crises, including a 2001 foot-and-mouth disease outbreak in the U.K., led to tighter supervision of how livestock is sourced and tracked in Europe, north America and Australasia.
This boosted the fortunes of Allflex, helping it grow from a low-tech maker of plastic ear tags for cows to a world leader in high-tech labelling, according to David Symondson, deputy managing partner at Electra Partners.
“Over 14 years the product range has gone from a yellow plastic tag to electronic tags, to tissue sampling tags, to different species. We do implants used for domestic pets, fish, salmon in the U.S. and possibly salmon farms around the world in future,” he said.
A recent scandal in Europe, where beef products sold in supermarkets were found to contain horse meat, could also benefit the firm, he added.
Enabling officials to trace animals from birth to slaughter has also made it easier to enforce controls on livestock imports from outside the European Union, Symondson said.
“I think today about 30 per cent of the world’s livestock is identified so there is potential for significant growth in the future as different countries jump on the bandwagon,” he said.
Allflex, formed in 1955 in New Zealand, is now primarily based in France and the sale requires French regulatory approval.
Billed as the world’s leading maker and distributor of visual and electronic animal ID tags, Allflex now makes over 200 million tags a year.
The company’s Canadian operations are based at Ste. Hyacinthe, Que., and operate in tandem with its U.S. arm based in the Dallas-Fort Worth area.
— Chris Vellacott is a Reuters correspondent in London, England.