05 Apr 2004 Disposal of Rico by The Music Group
Rutland, the UK private equity group, announces that one of its portfolio companies, The Music Group, has today completed the sale of its wholly owned subsidiary Rico Holdings Inc. for $22.2 million. The Music Group was formed to acquire the music instrument manufacturing businesses of Boosey & Hawkes PLC for £33.2 million in February 2003.
Rico is a California based manufacturer and distributor of reeds and mouthpieces for woodwind instruments. It is a leading music industry brand with a significant worldwide market share. The business is being sold to J.D’Addario & Company Inc, a privately owned US music accessories manufacturer renowned for the manufacture of guitar strings and drum heads. In the year ended 31 December 2003, Rico reported turnover of $18.3 million and EBITDA of $3.2 million.
The net proceeds of $20.5 million from the Rico sale will be used to repay debt of $16.8 million and make a distribution of the balance to fund investors. Following the disposal of Rico, TMG has reduced bank debt from £19.5m at acquisition to approximately £8.0 million at current exchange rates.
Commenting on the sale, Nick Morrill, of Rutland said:
“The disposal of Rico is the first major step in our repositioning of The Music Group. Rico is a mature business whose operating margins since acquisition have been improved through investment in automation and better control of costs. It is sensible for us to now realise value and concentrate our energies on those parts of the Group where the opportunities for performance improvements are greater.”
The transaction was co-ordinated on behalf of Rutland by Nick Morrill and Ben Slatter.
Rutland invests in UK companies facing difficult strategic challenges which may be underperforming, in need of restructuring or entering a period of change. The value of such companies will usually range from £20 million to £150 million with Rutland committing between £10 million and £40 million per investment. Rutland considers all later stage transaction types across most major business sectors.
Rutland has invested a total of £89 million out of the £210 million of capital committed to its first fund which closed in March 2001.