Warburg Buying Safetykleen Europe

LONDON (Reuters) – U.S.-based buyout firm Warburg Pincus said it agreed to buy a majority stake in UK-based Safetykleen Europe from rival JP Morgan Partners in a deal valuing the business at around 565 million pounds ($1.12 billion).

The deal to buy the industrial cleaning services company will see Safetykleen's senior management continue to own a minority stake in the company, Warburg Pincus said in statement on Wednesday.

“As a market-leading, high growth business, it (Safetykleen) fits well with our investment criteria and we are delighted to be able to support the next stage of the company's continued success,” said Peter Wilson, a managing director at Warburg Pincus.

The deal shows that so-called secondary-buyouts — asset sales between buyout firms — are still being undertaken despite the credit crunch.

Some commentators have said that such deals would likely be the worst hit by buyout firms' inability to raise as much debt as during the recent M&A boom.

Secondary buyouts are often viewed as relying more heavily on financial engineering and high debt to achieve the buyer's returns, because businesses previously owned by buyout firms have often already had substantial costs cut and can leave a new owner limited scope for operating efficiency gains.

Safetykleen, based in Isleworth, England, sells parts and component cleaning machines to customers in the automotive and industrial sectors and employs 1,400 people. It operates in 13 European countries as well as China, Taiwan, Hong Kong and Brazil.

The deal is expected to complete in June, Warburg Pincus said.

(Reporting by Mathieu Robbins; editing by Rory Channing)