LDC, part of the Lloyds Banking Group (LSE: LLOY)(NYSE: LYG)(ADR), has backed the management buyout (MBO) of global ID cards business Magicard, from defense and security group Ultra Electronics Holdings plc (LSE: ULE), for £22 million in cash, and up to £3m in additional milestone payments subject to earnings growth over the next two years. Following the divestment, Ultra Electronics ID will operate as Magicard Ltd. The MBO was led by Magicard’s CEO Andy Matko. As part of the deal, senior members of the management team have acquired a minority shareholding, with LDC investing for a significant majority stake. Magicard will continue to operate from its existing facilities in Weymouth, Dorset, and all employees will remain with the business as part of the transaction. Magicard, founded in 1992, is one of the world’s leading manufacturers of secure desktop ID card printers, software and related consumables for the identity and access control markets. Its products, which include direct-to-card and retransfer printers, are capable of printing and encoding all types of card format, including magnetic stripe, proximity cards and ‘chip and pin’ cards used in the banking sector. Magicard printers are renowned for their built-in card security features, including the patented HoloKote secure watermark.
Magicard printers are capable of printing any type of card, from visual IDs to access control and financial cards.With an installed base of more than 70,000 printers globally, the business’ end users include major private and public sector organizations around the world. Its products are used to print staff identify cards for NHS England and to help secure global summits, including the G20. Magicard operates sales offices in the UK, US, Dubai and China. Over 70% of its £19.3m revenues comes from international markets, where it sells to more than 100 countries. The global market for secure desktop ID printers is forecast to grow at a CAGR of 6% between 2014 and 2019, thanks to increasing focus on identity authentication amongst corporate and government organizations and localized, instant issuance. Electronic identification (eID) and electronic Trust Services (eTS) are key enablers for secure cross-border electronic transactions and central building blocks of the EU Digital Single Market, Which aims “to open up digital opportunities for people and business and enhance Europe’s position as a world leader in the digital economy,” says the European Commission. The EU has identified the completion of the Digital Single Market (DSM) as one of its 10 political priorities. A Digital Single Market (DSM) is one in which the free movement of persons, services and capital is ensured and where the individuals and businesses can seamlessly access and exercise online activities under conditions of fair competition, and a high level of consumer and personal data protection, irrespective of their nationality or place of residence. Following LDC’s investment, the business plans to focus on driving sales of its new Helix retransfer printer and increasing its expansion into new international markets. “Ultra ID is a sound and profitable business, but one that has become non-core to Ultra’s consolidated portfolio and future plans,” said Rakesh Sharma, CEO of Ultra. This first significant divestment by Ultra will allow greater focus on core businesses and longer-term strategy.” “This is exciting news for Magicard and our global network of loyal partners,” said Magicard’s Malko. “This deal, along with the recent development of our Helix retransfer printer, gives the management team the opportunity to drive the business forward as owners and unlock the potential of the business, developing new products and targeting new geographies. LDC’s investment adds the capital we need to accelerate our expansion, as well as a strategic partner who understands and supports our ambitions for the future.” “Transactions like this create a mutually beneficial outcome for both parties, releasing funds for the parent company whilst creating a new independent business with a highly incentivized and energized management team,” said Chris Hurley, CEO of LDC. “We expect to see more M&A activity like this over the coming months as corporates look to refocus on their core business and raise capital from divestments.” In 2015, the Magicard ID business had revenues of £19.3m and operating profit of £4.0m. The gross assets of the ID business at December 31, 2015 were £8.8m. Ultra will use the proceeds of the sale to reduce group indebtedness. The transaction is subject to US regulatory approvals and customary closing conditions, and is expected to close by the end of the second quarter of 2016. The deal was transacted by LDC’s London team, led by Investment Directors Gordon Hague and Chris Neale who join the board, supported by Investment Executive Aylesh Patel. Chris Thomas has been appointed non-executive chairman. LDC was advised by Duff and Phelps, CIL, RSM and CMS Cameron McKenna. Ultra Electronics Holdings plc was advised by KPMG and Osbourne Clark while management were advised by Liberty Corporate Finance and Shoosmiths. LDC invests in a broad range of sectors and has particular experience in Construction & Property, Financial Services, Healthcare, Industrials, Retail & Consumer, TMT, Travel & Leisure and Support Services. LDC back ambitious management teams from UK-based companies seeking between £2m and £100m of equity for management buy-outs, institutional buy-outs or development capital transactions. The firm was established in 1981 hand has a UK regional network of 9 offices. The firm is part of the Lloyds Banking Group and is authorized and regulated by the Financial Conduct Authority. Lloyds Banking Group is a major British financial institution formed through the acquisition of HBOS by Lloyds TSB in 2009. HBOS is the holding company for Bank of Scotland plc, which operates the Bank of Scotland and Halifax brands in the UK, as well as HBOS Australia and HBOS Insurance & Investment Group Limited, the group’s insurance division. The group’s history stems from the founding of Bank of Scotland in 1695 by the Parliament of Scotland before the Act of Union, which is the second oldest bank in the United Kingdom. The group’s headquarters is in the City of London and its registered office is on The Mound in Edinburgh. Lloyds Banking Group is a constituent of the FTSE 100 Index. It had a market capitalization of $91.29 billion as of May 26, 2016. The Ultra Electronics Group operates a wide range portfolio of specialist businesses designing, manufacturing and supporting electronic and electromechanical systems, sub-systems and products for defense, security, transport and energy applications worldwide. Ultra comprises 23 businesses, and employs over 4,500 people. Over the last two decades Ultra has expanded and developed its international footprint and now has significant business in Europe, North America, the Middle East and Asia Pacific. The company was founded in 1920 and is headquartered in Greenford, Middlesex, United Kingdom.]]>