Penta Capital LLP arranged and led the equity investment in the MBO of esure from Lloyds Banking Group in February 2010 for £190m. This was entirely funded through Tosca Penta Investments LP, a single purpose fund raised and managed by Penta Capital LLP.

Tosca Penta Investments LP has sold shares worth £305m upon the IPO and retains an 11.6% stake in esure worth £140m. It has also provided further options to sell shares worth £90m under the Over- Allotment Option which, if fully exercised, would reduce its stake to 4.1%

The investment in esure was managed by David Calder and Charles Schrager of Penta Capital who have been directors of esure since the MBO.

David Calder said:

“We are delighted to have backed Peter Wood and his team at esure on the most recent phase of their journey from a startup in 2000 to a FT250 company in 2013. This IPO is testimony to the strength of the company, its brands and most importantly its management and staff who deserve all their success.”

Charles Schrager added:

“The IPO exit, together with earlier returns of capital, will generate a money multiple of over 3.3x for Tosca Penta Investments LP. This is a great endorsement of Penta Capital’s model of sourcing high quality off-market investments and funding them on a deal by deal basis from our growing base of direct co-investors. We believe this will increasingly be the model of choice for private equity investors”

Conditional dealings in the shares of esure commence today, 22 March 2013 and unconditional dealings are expected to commence on 27 March 2013.

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Highlights

• Group Operating Profit* of £80.8million (2010: £18.6million)
• Gross Written Premium up 9.5% at £513million (2010: £468million)
• Combined Operating Ratio down to 94.6% (2010: 114.5%)
• Net Loss Ratio down to 66.8% (2010: 91.5%)
• Total in-force policies up 6% to 1.65million (2010: 1.56million)
• Motor insurance policies in force 1.21million (2010: 1.18million)
• Home insurance policies in force up 16.6% at 443,000 (2010: 380,000)

Peter Wood, Executive Chairman of esure, said: 

“These results reflect continuing improvements in many areas of our business. In 2011, we saw the first rewards of concerted action to optimise our underwriting performance, stamp down harder on fraud and grow our income from the additional services we offer our customers. The results of these actions contribute to a significant increase in 2011 profits by boosting key contributors, laying foundations on which we plan to build.


“We look forward with confidence.”


Ultraspeed was founded in 1998 and serves a variety of FTSE 250 companies, charities and digital media customers, including Nando’s, British Heart Foundation, John Brown Media Group and Bon Voyage Travel & Tours.

Ultraspeed is a pure-play managed hosting business that will be integrated into Six Degrees Group’s managed data division. Ultraspeed has an average customer spend of £25,000 per annum, positioning it strongly into the mid-market that is the focus for Six Degrees Group. Most of Ultraspeed’s revenues derive from Private Cloud Services with the remaining being a blend of dedicated server and shared cloud server hosting. Ultraspeed’s team, which has deep expertise in the managed and cloud hosting sector is highly complementary to the Six Degrees Group’s cloud offering.

Alastair Mills, CEO of Six Degrees Group, stated:
“I am delighted to bring Ultraspeed into Six Degrees Group. Our 2012 strategy is very clearly focused on expanding our managed hosting and cloud capabilities and this acquisition marks a significant move in that direction. Ultraspeed brings advanced technologies to the Group and a talented team of people with superb hosting know-how. In addition, their customer base is in our mid-market sweet-spot and they boast a strong presence in the digital media sector that is a key industry for Six Degrees Group. Forrester Research predicts that cloud services will grow at 27% CAGR and our current performance comfortably exceeds that level. With more investments in hosting and cloud to follow, I am confident that we are well-positioned to be the fastest growing and most admired managed data services company in the UK mid-market.”

In response, Jordan Gross, CEO of Ultraspeed, commented:
“This is an exciting development for Ultraspeed’s employees and customers. We have built a very strong business focused on managed hosting and cloud services. I decided that it was right for Ultraspeed to join Six Degrees Group as that will allow us to add strong network and datacentre offerings to our proposition, along with converged services, giving us a strong end-to-end capability. We’ll also have greater financial strength and a broader technology platform allowing us to continue to target larger companies in the mid-market space.”

Following a significant fundraise and the acquisition of datacentre UKSolutions, MPLS provider NetworkFlow and voice services company Protel, the new Group has 60 staff across four offices and 900 customers.

The Group is led by ex-SpiriTel chief executive Alastair Mills and is backed by Penta Capital who previously provided funding to SpiriTel and has now fronted the fundraising exercise to raise £60million for the new Group, representing one of the largest single investments in the sector in recent times. Mills has retained his core team from SpiriTel, including CFO Ronnie Smith, commercial director Jonny Shanmuganathan and company secretary Andrew Booth. This management team will be joined by the directors of the acquired companies and another significant senior hire is expected to be confirmed within the next week.

UKSolutions was founded in 1996 by managing director Daniel Lowe who started the business as a 17 year old student. Dan is well-known in the datacentre space, having campaigned vociferously about the impact of the UK Carbon Reduction Commitment on IT outsourcing and the Cloud. UKSolutions has thrived, despite being in a highly competitive market, by focusing on mid-market customers who require bespoke solutions and have high information security and service quality requirements.

NetworkFlow was founded in 2000 by Graeme Duncan as a provider of enterprise-grade Internet connectivity products. In 2002, it was granted RIPE authorisation and begun the build-out of its network which was expanded in 2006 to include an MPLS core. The company now has interconnects with over 20 major network operators, including LLU agreements, allowing it to offer a blend of fibre and copper access circuits.

Protel was founded in 2001 by managing director David Hamilton as a managed voice services provider. Its services include global inbound and outbound voice delivery, voice business continuity solutions, fixed mobile convergence offerings and SIP trunk migration services, all managed via its bespoke customer portal.

The three initial acquisitions provide a formidable growth platform for the new Group which will expand by implementing a clear strategy of providing three key managed data services elements: core, connectivity and overlay services. UKSolutions provides core enablement: through its 15,000 square feet of datacentres spread over two sites it delivers solutions that include the provision of dedicated managed hosting environments, hybrid cloud infrastructures and full private cloud architectures. NetworkFlow provides access and WAN connectivity: through its own next generation network it provides high-bandwidth connectivity solutions for enterprises. Protel provides overlay converged services that leverage the underlying core infrastructure and access technologies. To complete its converged communications portfolio, the Group expects to acquire mobile voice and data capabilities in the near future.

See Six Degrees Group for more details

The investment, sees Penta and its investment partners, including Toscafund, support the same team who successfully executed the buy-and-build behind SpiriTel plc, led by Alastair Mills, which was sold last year to Daisy Group plc for c.£37m. The investment represents one of the largest single investments in the managed data services sector in recent times with the strategic objective of building a market-leading core-to-edge service provider. Unencumbered by legacy constraints, the new group is capable of delivering the managed hosting and cloud connectivity solutions required by sme and corporate users in this era of instantaneous communications.

The initial three acquisitions are of leading datacentre operator UKSolutions, MPLS provider NetworkFlow and voice services company Protel, giving the new Group initial operations with [70] staff across four offices and [X,000] customers. The three acquisitions provide a formidable growth platform for the new Group which will expand through a clear strategy of providing three key managed data services elements: core, connectivity and overlay services.

UKSolutions provides core enablement: through its 15,000 square feet of datacentres, it delivers solutions that include the provision of dedicated managed hosting environments, hybrid cloud infrastructures and full private cloud architectures from their two datacentres. NetworkFlow provides access and WAN connectivity: through its own next generation network it provides high-bandwidth connectivity solutions for enterprises. It designs bespoke networks via 20+ interconnect agreements with major UK providers. Protel provides overlay converged services that leverage the underlying core infrastructure and access technologies. Its services include SIP trunking, inbound and outbound voice delivery, fixed mobile convergence and business continuity solutions, all managed via its bespoke customer portal. In order to complete its converged communications portfolio, the Group expects to acquire mobile voice and data capability in the near future.

The UK managed hosting market grew at a historical 4 year CAGR of 18% to 2010 (Gartner) and European market growth is expected to accelerate to 23% CAGR to 2013 (The 451 Group). By the end of 2011, cloud computing services are expected to generate 15% of worldwide technology spend with anticipated annual growth of 26% to 2015. This CAGR represents five times the growth rate of the tech industry as a whole (IDC).

Steven Scott of Penta Capital commented:
“We are delighted to be back in business with the former team at SpiriTel. We enjoyed working together and proved the buy-and-build potential in the fragmented telecoms sector. This time, our focus is far more data-centric than SpiriTel and we plan to build a substantial group through strong organic growth and by acquiring a complete service delivery capability. We’ve selected best of breed operators to establish our platform and come at this investment without any legacy issues. We look forward to building a substantial and attractive data-centric business over the coming years.”

At the time of announcement, Alastair Mills made the following statement:
“SpiriTel was one of the fastest growing voice companies in the UK before its acquisition last year. This was testament to a hugely talented and driven management team that delivered 20%+ organic growth, through a recession, in a declining market. I am delighted to be working with the team again following our recent successful fundraise. The trends identified by both analysts and end-user clients are the same: managed data services will continue to grow rapidly, driven by the desire for cloud connectivity and virtualisation. At SpiriTel we faced a challenge familiar in the market: we were a voice company trying to turn into a data company. This time, our Group is very firmly focussed on growing from a strong data services core: we’re starting with 15,000 square feet of datacentre space, a next generation network and a full suite of IP voice services. We are firmly positioned to capitalise on an exciting growth market.”

Founded in 1996, EAT. has established itself as one of the leading brands in the £3 billion specialist food and coffee ‘to go’ market. It has 110 stores across the UK selling a wide range of soups, salads, sushi, panini, sandwiches, baked goods and coffee, which are freshly prepared in-house by EAT. each day.

The business’s strongly differentiated, quality-led brand and proposition ensured it performed robustly during the downturn with sales in the last twelve months topping £85 million, up from £68 million in 2008.

Lyceum Capital will now help the founders and management accelerate a store opening programme in the UK which could support well over 300 branches. The strategy will also develop the business and brand in the UK and internationally based on its leading product ranges.

Founders Faith and Niall MacArthur will retain a substantial shareholding along with other management and the deal will see Penta Capital sell its interests in the business. Lyceum Capital’s Simon Hitchcock and Phillip Buscombe will join the board of EAT. alongside Chairman John Herring.

Niall MacArthur, founder and Managing Director of EAT. said: “This deal marks the next major stage in EAT.’s development and will be the catalyst for an expansion programme that will see us extend our reach throughout the UK and continue to develop our successful brand proposition.

“Providing our customers every day with the innovative, high quality and great value products we are well-known for will remain at the core of this exciting growth strategy. We plan to invest further in our products, shops and great people to ensure we continue to build on our loyal customer base.”

Torquil Macnaughton of Penta Capital, said: “EAT has been an extremely successful investment for Penta and it has been a pleasure working with Niall, Faith and their team over the last five years.

“During our period of involvement the business has grown from 45 shops to well over 100 shops and we believe that it is well placed to continue this strong growth profile with its new partners. We wish the MacArthurs, the management team and Lyceum every success for the future.”

Introduction

The Board of Young & Co.’s Brewery, P.L.C. (the “Company” or “Young’s”) is pleased to announce the acquisition of Geronimo Group Limited (“Geronimo”) from its shareholders, being principally Penta Capital and Rupert and Jo Clevely, for £60 million in cash.
Geronimo

Geronimo, which was founded in 1995, operates a high quality estate of 26 individually-designed, food-led managed pubs. The estate has exceptional locations with 22 pubs based in Central London, three at Heathrow and one in Surrey.

Geronimo’s pubs currently generate an average AWT of £23k, with food accounting for over 40% of sales. Geronimo has achieved strong organic growth and its management team has a proven ability of rolling out their successful format in a range of different retail locations.
The Geronimo estate comprises 10 prime London freehold pubs, 13 leasehold pubs and three concessions. A full list of Geronimo’s pubs is contained in the notes to this announcement.

Geronimo has a strong track record of identifying excellent pubs in good locations and has an attractive pipeline of potential new sites.

The management team of Geronimo will be staying with Young’s and Rupert Clevely will join as an executive director of the Young’s Board with immediate effect as Managing Director – Geronimo. Jo Clevely will continue to drive design strategy which is integral to the Geronimo format.

Acquisition rationale

The transaction achieves an important step change in the size of the Young’s managed estate, which will be increased by more than 20% to 148 pubs, taking the total estate to 247 pubs. The acquisition fits well with the Young’s expansion strategy and its focus on premium London managed houses.

The acquisition brings to Young’s a new, parallel and growing concept, targeting a differentiated but complementary demographic. The Young’s and Geronimo pubs will continue to be run discretely within the enlarged business.

In addition to its ethos, existing estate and attractive pipeline of new pub opportunities, Geronimo brings expertise in operating both leases and concessions at high footfall locations, with pubs at Heathrow Airport, St. Pancras International Train Station and the Westfield London Shopping Centre in Shepherd’s Bush.

Whilst maintaining a high freehold mix remains important to the overall Young’s strategy, the addition of this particular expertise enables Young’s to increase its rate of new site openings with attractive returns on capital.

The combination of the two businesses will bring the benefits of scale including purchasing, cost savings and a cross-over of best operating practices in areas such as food, wine and pub design, training and the best people.

Geronimo financial performance and impact

In the year to June 2010, Geronimo’s pre-overhead EBITDA was £6.1 million. Geronimo is currently expected to deliver pre-overhead EBITDA of £8.2 million for the year to June 2011 with the increase driven by like-for-like growth, the full year impact and increased maturity of new openings in the year to June 2010 and the opening of The White Horse in the Broadgate centre in October 2010.

The recent openings and the planned opening of a unit in the new Westfield Stratford Shopping Centre in late 2011 are, at maturity, expected to increase EBITDA by around £1 million on an annualised basis.

Geronimo has overheads of approximately £3 million. Young’s expects to make cost savings of £1.5 million through the combination of the two complementary businesses. On a fully integrated basis, further savings of around £1 million would be available. However, Young’s plans to retain a separate operating team focused on the rollout of the Geronimo format, maintaining its individuality and delivering continued strong organic growth.

The transaction is expected to be earnings enhancing in the first full year of ownership.

Financing


On an unaudited pro forma basis, the net book value excluding net debt of Geronimo was £30.6 million as at 30 June 2010.

The acquisition of Geronimo is being financed by a new £100m five year bank facility that the Company has entered into with The Royal Bank of Scotland and Barclays Bank. This replaces the previous £40 million revolving credit facility.

Young’s retains a robust balance sheet following the acquisition and a robust long term financing package. Young’s intends to enter into swaps so that £100 million of its debt will be at fixed rates.

Commenting on the transaction, Stephen Goodyear, Chief Executive of Young’s, said:

“The acquisition of Geronimo, a business we have known for a number of years, represents an excellent opportunity to accelerate the growth of the Young’s managed estate.

“The acquisition fits very well with our expansion strategy which is focused on high quality, food-led, managed houses in the London area, a strategy that we will continue to pursue with both the Young’s and the Geronimo formats. Geronimo’s team also brings considerable expertise in the operation of leases and concessions in high footfall retail locations such as airports and shopping centres and this represents a new growth opportunity for us.

“I am particularly delighted that Rupert Clevely has agreed to join our Board and that his senior management team will be staying. We look forward to combining the best of the expertise from both teams to drive the enlarged group forward.”

Rupert Clevely, Chief Executive of Geronimo, added:
“Young’s is the perfect home for Geronimo and I am delighted that the Young’s Board wants to continue to embrace and retain Geronimo’s inimitable DNA. Key to our success is the entrepreneurial flair and individuality, proven food expertise and home-from-home hospitality for which Geronimo is renowned and which our customers will continue to enjoy.”

“The continued involvement of my trusted team will ensure that Geronimo’s unique spirit will be maintained and that the Geronimo footprint will develop alongside and as a complement to Young’s as the combined business looks to expand both formats.”

SpiriTel Business, the company’s main trading unit, was set up in 2007, a year after Alastair Mills was appointed chief executive. Since, it has bought 12 other reseller companies and recently reported organic growth of 15 per cent. SpiriTel said cross selling between its mobile, fixed and IP units has enabled the increase.

This is the largest acquisition the Company has made. It gives Daisy a strong foothold in the mid-market, strengthening our sales team and engineering force.
SpiriTel non-executive chairman Lord St. John of Blesto said: “The offer recognises the value created by our strategy of acquiring and integrating 12 businesses since 2006. Daisy will benefit from the customer base and cross selling culture the management team has built.”

Mills said: “The management has executed a comprehensive turnaround strategy to the point where we have now sold a business of genuine scale that competes for and wins major contracts with major businesses.”

Investors’ returns
The deal provides a substantial profit for private equity group Penta Capital, which originally invested in the service provider in 2003 and led a £10 million fundraising in November 2009.

Penta Capital partner Steven Scott said: “This was a difficult investment in the early years, which the current management team completely transformed, with our support, into a dynamic buy-and-build group in a rapidly consolidating sector. Twelve acquisitions were integrated quickly and effectively on a relatively ungeared basis and, despite the economic uncertainty, the team delivered organic growth alongside the acquisitions.”

A new company, esure Group Holdings Ltd, representing Peter Wood, other management shareholders and new external investors, has bought the shareholding in esure that was inherited by Lloyds Banking Group after its acquisition of HBOS plc in 2008.

The cash consideration for the deal is slightly in excess of esure’s book value in Lloyds Banking Group’s accounts of £185million.

Funding for the buy-out was obtained through Tosca Penta Investments LP, a new private equity vehicle raised and managed by Penta Capital.

Peter Wood, Chairman and CEO of esure, said: “I am delighted that we have managed to reach a mutually beneficial agreement with Lloyds Banking Group for esure management and external investors to buy-out Lloyds’ majority shareholding. When I set up esure with Halifax plc as a joint venture partner in 2000, no-one could have foreseen the events that would lead to Lloyds Banking Group – who already offer car and home insurance successfully – taking on that role.

This move creates a clean base for both companies to move forward pursuing their own insurance strengths unfettered. The agreement marks the start of a long period of hard work for everyone at esure but we will relish this challenge”.