BlackRock, Norges, and GIC have signed up as investors to support a listed private-equity vehicle founded by Melrose Industries. The float will be a welcome boost for the London market.
Simon Peckham (CEO of Rosebank Industries) said that the company’s new shell would first list on London’s junior Aim Market. The founders believe that Rosebank will move to the main market quickly once it begins buying companies and reaches the FTSE 100.
He said that the group had secured the support of blue-chip investors, including Artemis and Aviva asset managers to take a piece of an initial £50mn fund raising. Six former Melrose executives will run the company.
Rosebank, a Jersey-incorporated company, will ask its investors to provide more funding once it finds its first deal. The company will be targeting industrial and manufacturing companies in the UK, US or Europe with a value up to $3bn. Peckham said that the company will follow the “buy improve sell” model, which has been the hallmark of Melrose for the past two decades.
Former Melrose boss and colleagues are amongst the last of City of London’s old-school raiders. They buy companies, turn them around and reward themselves handsomely if they succeed.
“We are back” . . We want to do it again”, said Peckham. He added that Rosebank will target public companies with low performance, businesses owned or controlled by private equity, and divisions of larger groupings.
In 2018, their run at Melrose culminated with a politically charged and acrimonious £8.1bn hostile acquisition of engineering group GKN. The executives received a £180mn bonus this year after breaking up the company. This was on top of the bumper payouts they had previously received from previous acquisitions.
Peckham has refused to rule out a hostile bid against a publicly traded company.
Melrose initially raised £13mn on Aim when it was listed in 2003. It has since raised more than £10bn equity and £17bn debt to finance deals over the past two decades. Peckham attributed the failure of the GKN turnaround to the challenges presented by the pandemic.
Rosebank will publish its admission document on Tuesday, ahead of the flotation planned for Thursday. Peckham, the group’s CEO, said that the Aim market was the fastest way to raise money. Rosebank promised its early investors that they would be promoted to the main board after it completed its first deal.
Peckham said that the group was evaluating 10 to 15 possible targets. He predicted that Rosebank assets would be primarily in the US within five years. The group’s goal is to double investors’ equity in three to five year. Peckham said that the group would seek a second investment to sell before its first, indicating a rapid expansion.
Rosebank’s management will receive a similar three-year incentive package to Melrose. They’ll get a 10% share of any increase in group value after investors’ returns pass 8% annually. Peckham stated that people don’t mind paying for results.
Peckham, along with his co-founders, resigned from Melrose in this year’s after the company’s strategy shifted to focus on aerospace. The executives thought about raising a private-equity fund or partnering up with buyout groups to do specific deals. Peckham said that it was “just not as fun” because the groups’ influence on investment decisions would be too great.
Peckham said that Rosebank’s bosses would contribute around 10% of the initial £50mn in fundraising. Christopher Miller will not be a part of the Melrose management team, while David Roper is a contributor but will not be an executive. Justin Dowley, the outgoing Melrose chairman, will lead the new group.
Aviva and Artemis confirmed that they had invested in Rosebank. BlackRock, GIC, and Norges declined comment.
Kunal Kothari said that the fund manager of Aviva had supported the management team at Melrose for over a decade and they’ve always created value for their shareholders.
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