news: I S S U E N O 6 S P R I N G 2 0 0 3

I N D U S T R I K A P I T A L

VIEWPOINT

GOOD THINGS came in threes for IndustriKapital last year. We made three new investments – the buyouts of the Germangardening equipment company Gardena, the French gastronomic food products groupLabeyrie and the Dutch market leader inmobility aids Welzorg.

Three of our portfolio companies – AlfaLaval, Intrum Justitia and Nobia – madedebuts on the Stockholm Exchange, and IKfacilitated major add-on acquisitions for threeportfolio companies, namely Superfos,Consolis (formerly Addtek) and CPS Color.

IK’s momentum has continued into thefirst quarter of 2003. Already the firm hasrecorded add-on acquisitions for Labeyrie,Alfa Laval and Intrum Justitia while theFinnish manufacturer of stone wool insulation products, Paroc, has been sold.

As these transactions demonstrate, forfirms who are flexible, fast and sufficientlyfocused it is possible to achieve satisfactorylevels of deal activity and good investmentreturns in spite of the economic gloom of thepast two years and the uncertainties wroughtby the threat of military action in Iraq.

IK’s trade mark is the firm’s ability andcommitment to supporting and working withportfolio companies to help them achieve‘strategic focus’, unlock hidden value andmaximise their potential, through mergersand acquisitions alongside organic growth.

A model example is Dyno Nobel inNorway. The latest piece in the company’smajor restructuring jigsaw was put in placethrough the recently signed merger with TheEnsign Bickford Company (EBCo) of theUS. This has created a world leader inindustrial explosives and initiation systemsand paves the way for a potential return ofDyno Nobel to the Oslo Stock Exchange in a few years time.

Dyno Nobel is a showcase transaction for our Danish and Norwegian team, featured in this issue of IK News. This dealdemonstrates how skilful and effective IK can be in peeling away the layers of unwieldyconglomerates to produce a series of streamlined, focused, efficient business entities which ‘work’.

This tried and trusted formula of activeownership and a strategic as well as operational approach to value creation hasenabled IK to work successfully through thebad times as well as the good since 1989.

Björn Savén, Chief Executive, Industri Kapital

INDUSTRI KAPITAL HAS been instrumental inputting Denmark and Norway on Europe’s private equity map. Having backed a string ofground-breaking deals – including the largest atthe time in each country – IK has pushed backthe frontiers and set the standard in terms ofwhat can be achieved.

IK’s largest deal in Denmark so far is thetakeover of the conglomerate Superfos in 1999.Its major transaction in Norway is the LBO ofthe chemicals and industrialexplosives company Dyno ASA in 2000. Bothtransactions were public-to-privates (PTPs) from theCopenhagen and Oslo stockexchanges, respectively.

“These deals are interesting and important interms of their size and complexity and primeexamples of how IK can successfully restructureand refocus companies to create value,” says IKDirector Mads Ryum Larsen, who leads the firm’s investment team for Denmark andNorway.

Dyno ASA has now been through a radicalrestructuring. Dyno’s speciality chemicalsinterests were merged with those of another IKportfolio business, Neste Chemicals, to formDynea. Following an extensive internal

improvement programme and reorganisationtogether with the merger with The Ensign-Bickford Company (EBCo) of the US (see separate article), the remainder of the group,Dyno Nobel, is now a world leader in industrialexplosives and initiation systems.

Superfos has also been through a series of strategic and operational improvements including disposals of non-core activities and the acquisition of the Danish injection-moulded

plastic packaging company Jotipac last year.This has created Europe’s market leader ininjection moulded plastic consumer packagingand paved the way for further rationalisationsand consolidation within the industry.

“Denmark and Norway are two of IK’s traditional, core markets and the firm has been an active investor in these countries since the start,” notes Ryum Larsen. The firmhas made four investments in Denmark andthree in Norway since 1991 (see table). IK also has a strong following among institutional investors from the region with nine Danish

:PUTTING DENMARK AND NORWAY ON THE PRIVATE EQUITY MAP

IK’s dedicated investment team predictsmore activity in the coming year

:KEEP MOVING INA COLD CLIMATE

“Denmark and Norway are two of IK’s traditional, core markets and the firm has been an active investor in these countries since the start.”

MAIN STORY

and 14 Norwegian institutions committing capital to its funds.

Active portfolio management

Alongside the restructuring of Dyno Nobel and Superfos, IK has also worked on revitalisingportfolio company Fona, a leading Danish retailer of brown goods, telecommunications,music and home office products.

IK originally backed Fona in a buyout fromThorn in 1997. During the past few years the company has faced challenging market conditions and shown unsatisfactory financialperformance. Following an extensive restructuringprogramme, Fona’s brown goods retailing andconsumer financing activities merged with those of Fredgaard Radio in June 2001 to form F Group. FGH, F Group’s holding company,now owns 37 per cent of the merged company.

“The plan is to fully integrate Fona intoFredgaard Radio to produce a much strongerand better positioned company, however there is still some way to go,” says Ryum Larsen.

Although M & A activity has been low across Europe over the last few years, IK hasremained very active in Denmark and Norway by developing its portfolio companiesand securing exits while closely monitoring deal opportunities. “It has been a lively three

MARKET LEADERS FROM UP NORTH. Since 1991 Industri Kapital has made four investments in Denmark and three in Norway.

INVESTMENTS

ADDITIONAL ACTIVITIES

EXITS

DENMARK:• Superfos A/S (1999)

• Fona A/S (1997)

• Crisplant A/S (1992)

• Hjem-Is A/S (1991)

NORWAY:• Dyno ASA (2000)

• Kongsberg Automotive AS (1999)

• Liva Bil AS (Avis) (1991)

• Signed merger of Dyno Nobel / Ensign

Bickford Company

• Superfos acquired Jotipac Group

• Sale of stake in Dynal from Dyno Nobel

• Sale of stake in Polimoon from Dyno Nobel

• Ownership of HTH A/S through Nobia AB

• Kongsberg Automotive AS sold to

FSN Capital (2001)

• Hjem-Is A/S sold to Schöller Holding

GmbH & Co (1997)

• Crisplant A/S IPO’d on Copenhagen Stock

Exchange (1995)

• Liva Bil (Avis) AS IPO’d on Oslo Stock

Exchange (1993)

years,” Ryum Larsen notes. In terms of pinning down new investments,

Deputy Director Trygve Grindheim commentsthat IK has looked at a number of opportunities.“Unfortunately, most companies coming up forsale recently have either not been of sufficientquality, at the right price, or in the right sectors,”he says.

On the exit side a series of successful divestments from the Dyno Nobel portfolio hastaken place since 2000, and in 2001 IK sold theautomotive components company KongsbergAutomotive to the Norwegian private equity firmFSN Capital.

Sustained buyout action

With its dominance in traditional, cash flowindustries such as food processing and engineering and its large number of small tomid-sized companies with leading positions in niche industries, Denmark lends itself particularly well to private equity involvement.

Although some activity has been deterred by

the complex ownership structures of Danishcompanies, Associate Jakob Moeller-Jensenexplains that many of these structures are nowloosening. “Sustained buyout activity is anticipated due to the increasing corporategovernance focus by family-owned companies,trusts and major pension funds, as well as theneed for industrial restructuring,” he says.

The Norwegian industrial base is somewhat

smaller than the Danish and more dependenton cyclical industries such as oil and gas/off-shore and forestry. “However, Norway also has several internationally-oriented companiesin stable sectors and these can produce some valuable opportunities,” Associate Klaus de Vibe notes.

The region’s stockmarkets are also a good

source of potential deals and, with KongsbergAutomotive, Superfos and Dyno as good examples, PTPs are an established concept.

“The Copenhagen and Oslo stock exchangesare small and illiquidity can be an issue. ManyDanish and Norwegian companies are also frequently looking to achieve cross-borderexpansion and this strategy can often be bettersupported from the private equity arena than by

public market investors who takea different approach to risk andreturns,” Ryum Larsen comments.

Looking ahead, TrygveGrindheim concludes that although earnings visibility is still

not particularly clear, the investment mood inboth Denmark and Norway is now becomingmore positive. “Target pricing is easing down,deal flow is picking up and we expect to seemuch more activity over the next 12 months, particularly in the middle market,” he says.

:DYNO NOBEL– from unfocused conglomerate to explosives specialist

MAIN STORY

DYNO NOBEL’S track record of innovation dates all the way back to the company’s founder Alfred Nobel.

The IK-backed LBO of Dyno ASA from the

Oslo Stock Exchange in August 2000 is

noteworthy not just for its size but for the

textbook corporate restructuring which has

followed.

As Dag Mejdell, President and CEO of Dyno

Nobel – then part of Dyno ASA – explains,

“Industri Kapital made it clear from the outset

that Dyno ASA could not continue as a

conglomerate.”

“IK’s stated philosophy is to run highly-

focused companies,” he adds. “Its reputation

is based on taking companies back to their

core competencies and reconstructing them

through mergers and acquisitions.

True to form, immediately after the

acquisition Dyno’s chemicals business was

merged with Neste Chemicals, to form Dynea.

The remainder of the group, Dyno Nobel,

began its transformation with the divestment

of non-core businesses and real estate.

“These divestments were achieved at good

market values and – with a strong focus on

working capital management and cash flow

improvements – Dyno Nobel was able to repay

“The investment mood in both Denmark andNorway is becoming more positive. Deal flow is picking up.”

management, in a very positive manner,”

Mejdell observes.

A merger with The Ensign Bickford

Company (EBCo) had been on Dyno Nobel’s

agenda since 1999, even before Dyno’s

delisting. “Dyno Nobel and EBCo are a natural

fit. The merger affords a vast opportunity for

strengthening our manufacturing foot print,

raising our profile in the market-place as well

as taking out cost, and we can learn a lot from

each other,” Mejdell says.

Again IK has had a major role to play. “IK is

active on a daily basis in acquiring, developing

and divesting companies so it has a lot of

expertise in this area and has been closely

involved in the valuation and negotiation

process,” Mejdell maintains.

The merger will result in a world-class

company in the explosives industry with

particular emphasis on technical leadership

in initiation systems, explosives products

including ammonium nitrate capabilities, and

delivery systems. The new organization will be

well positioned to deliver integrated customer

solutions.

The enlarged company will have

approximately 5,000 employees, revenues

of some €900 million, and operate in 36

countries worldwide. IK will retain majority

control of Dyno Nobel, with EBCo’s parent

company, Ensign-Bickford Industries, receiving

a share in the enlarged group.

“Dyno Nobel’s restructuring and merger

with EBCo has been a major challenge,” notes

Mads Ryum Larsen. “The company, which is

now in a position to reap the full benefit of

these initiatives, will continue to focus on

enhancing profit as well as on growth.”

The enlarged and more profitable Dyno

Nobel is now much better placed to exit via an

IPO, which may take place on the Oslo

Stock Exchange in late 2004/5. “But for now,

our major task is to fully integrate EBCo’s

operations as quickly and smoothly as

possible,” Mejdell says.

a large proportion of the acquisition debt quite

early on,” says IK’s Mads Ryum Larsen.

Dyno Nobel’s reorganisation has broadly

followed an improvement plan devised by its

management team in the months preceding

the LBO. “As we set about devising a new

shape and vision for Dyno Nobel, it became

clear that we needed to be more of a ‘solutions

provider’, able to deliver a higher value-added

service and enhance our margins by having a

greater participation in the value chain rather

than as a ‘commodity’ explosives provider,”

Mejdell explains.

“We also need to work on our cost base

by taking out over-capacity and reducing

operating expenses,” he says. “IK was very

supportive of these initiatives and together

we have worked towards a common goal.”

In addition to bringing funding to the party,

Mejdell believes that IK has shown Dyno

Nobel’s management team the value of running

a focused company and also some of the

different disciplines required for moving from

being a conglomerate to being a fully focused

explosives company.

This is not just about strategy. “We have

become more disciplined internally and now

focus more strongly on controlling investments

as well as on the use and cost of capital,”

Mejdell continues.

“In addition to working on the Board level,

IK is also a good discussion partner and

has contributed simply by backing us, as

IK’S TEAM FOR DENMARK AND NORWAYIK has a dedicated, five-strong investment

team for Norway and Denmark. Led by

Mads Ryum Larsen, who joined IK in 1990,

the team works primarily out of IK’s

London office and comprises Deputy

Director Trygve Grindheim, Associates

Jakob Moeller-Jensen and Klaus de Vibe,

as well as Assistant Tina Jespersen.

The team members have all found the

private equity environment challenging

and refreshing. “Private equity is interesting

because it covers the whole spectrum of

corporate finance disciplines,” comments

Klaus de Vibe.

Jakob Moeller-Jensen says that the

team also enjoys working with companies

post-acquisition. “It is great to have high

level involvement with management from

start to finish,” he says.

MAIN STORY

TEAMWORK. “We have worked together with IKtowards a common goal,” says Dag Mejdell, DynoNobel’s Chief Executive.

FROM LEFT: Jakob Moeller-Jensen, Mads Ryum Larsen, Trygve Grindheim, Klaus de Vibe, Tina Jespersen.

:PORTFOLIO COMPANY NEWS

VALUE ENHANCING ADD-ON ACQUISITION FOR CPS COLORCPS Color acquired Corob Group

of Italy in December last year.

The acquisition further strengthens

CPS Color’s position as the

leading provider of postponed

colour production systems.

“From a strategic point of view,

the combination is very logical.

Market drivers and key success

factors are similar for both

companies,” commented Jyrki

Perttunen, CEO of CPS Color.

“A closer integration will create

new business opportunities as

well as strengthen our customer

service offering.”

The new company will invest

in joint development of next

generation colourants and tinting

equipment and intends to continue

to expand into new markets

beyond the paint industry. The

new combined company will

continue to use the two existing

brands, CPS Color and Corob.

CPS Color is a leading supplier

of advanced tinting systems.

The company’s sales in 2002

amounted to approximately

€ 110 million and it employs 315

people. Corob is a global supplier

of automatic tinting machines.

The company had sales of over

€ 50 million in 2002 and has 380

employees.

DYNEA SELLS OIL FIELDCHEMICALS BUSINESS TO M-IDynea International has sold its

Oil Field Chemicals business to

Texas-based M-I. The buyer has

also negotiated a long-term toll

manufacturing agreement with

Dynea in Lillestrøm, Norway, for

the supply of base chemicals

used in the production chemicals

operations.

“Dynea has successfully

developed the Oil Field Chemicals

business for some 20 years. The

sale to M-I is a logical step. It will

both enhance the Oil Field

Chemicals business and allow

Dynea to increase focus on our

core activities – adhesion and

surfacing solutions,” said Dynea

International President and CEO

Øivind Isaksen.

Dynea International, based in

Helsinki, Finland, is one of the

world’s leading providers of

industrial adhesive systems. In

2002, Dynea had combined

revenues of approximately € 956

million (preliminary figures) and

the company has some 3,200

employees.

ADDTEK ACQUIRES 50 PERCENT OF PARMA BETONILA AND CHANGES NAME TOCONSOLISAddtek International Oy Ab has

changed its name to Consolis

Oy Ab.

In a comment on the new name

Bengt Jansson, CEO of Consolis,

said: “The name describes the

company in many ways. The first

three letters – ‘Con’ – give an

indication of construction business.

’Solis’ stands for solutions and

solidity. Consolis is also a suitable

name for a company which,

during the past years, has acted

as the main consolidator of the

precast concrete industry in

Europe.”

Consolis has furthermore

completed a strategically

important transaction through the

acquisition of the remaining 50 per

cent of Parma Betonila Oy. The

acquisition enables Consolis to

further integrate its business with

Parma Betonila’s and to take

advantage of the company’s

technology and quality know-how

as well as its highly developed

control systems.

INTRUM JUSTITIA NUMBERONE IN FRANCE AFTER THEACQUISITION OF TWO LEADING RMS COMPANIESIntrum Justitia, Europe’s leading

Receivables Management

Services Group, has signed an

agreement to buy two leading

RMS companies in France,

Cofreco and Jean Riou

Contentieux, from the Fininfo

Group. The acquisition makes

Intrum Justitia the market leader

in France.

Both Cofreco and Jean Riou

Contentieux are well-known brands

in the French market and their

focus on consumer collection will

further strengthen Intrum Justitia’s

position in the RMS market.

ALFA LAVAL EXPANDS INADVANCED TANK CLEANINGAlfa Laval has signed a contract

with Homarus Holding A/S to

acquire the Danish Toftejorg

Group. The Toftejorg Group is a

specialist and a market leader in

advanced tank cleaning equipment,

targeting the marine and food

industries.

Sigge Haraldsson, President

and CEO of the Alfa Laval Group,

commented on the acquisition:

“The acquisition of the Toftejorg

Group should be perceived as a

complementary acquisition, in line

with our growth strategy. We

have had a strong presence and a

leading global position within the

marine and food industries for

many years. With the acquisition

of the Toftejorg Group we will be

able to expand our offering and

solve a crucial need for both

existing and potential customers

on the global market.”

MANAGEMENT CHANGESJan Roxendal assumed the

position of CEO of Intrum Justitia

as of 1 March 2003.

The Board of Directors of

Citylink has appointed Ove

Ericsson CEO of the Company.

ADD-ON ACQUISITION FOR LABEYRIELabeyrie has announced the

acquisition of Blini, the French

market leader in the production of

blini and taramasalata, with over

40 per cent market share in both

segments. Blini also produces

houmous, tzatziki, guacamole and

other “spreads” and had a turnover

of over € 26 million in 2002. Blini’s

main customers are supermarkets

in France, but Blini is also active

in the UK.

The acquisition strengthens

Labeyrie’s position in terms of

product diversification and lowers

seasonality. Blini’s existing

relationship with supermarkets in

the UK is furthermore expected to

facilitate Labeyrie’s international

expansion.

Labeyrie Group is the

European market leader in foie

gras and smoked salmon. The

Group encompasses Labeyrie and

Pierre Gueraçague in France as

well as Vensy in Spain. Labeyrie

employs 1 500 people on average,

and the company’s turnover for

the financial year 2001–2002

exceeded € 250 million.

THE INVESTOR IN FOCUS The Swedish Christmas-time

darkness allowed a stream of light

to shine through at the IK investor

meeting in Stockholm on 3

December as an important

message was conveyed: operating

profit in IK’s current portfolio

companies has increased by

nearly 25 per cent over the past

two years.

Portfolio valuation information,

a walking through and reaffirmation

of IK’s consistent entry and exit

strategy, as well as some

reflections on the current economic

environment were the main focus

of IK’s December investor meeting.

In addition, two of IK’s portfolio

companies, Sydsvenska Kemi

(SSK) and Labeyrie, gave

informative presentations. SSK’s

COO, Inge Pettersson, spoke

about the targets and process of

his company’s restructuring

programme. It was exciting to

witness SSK’s continuing success

and its overall improvement in

profitability, illustrated through

the statistics presented. From

Labeyrie, Xavier Govare (CEO) and

Jean-Paul Chevalier (Chairman)

gave an overview of their market

and the strong business model

that allows Labeyrie to grow,

while maintaining market

leadership and building even

further on the already renowned

brand names.

The day began at the Royal

Swedish Academy of Science and

concluded with a dinner at the

Grand Hotel for investors, advisors,

portfolio company management

and members of the IK team. The

main meeting was attended by

about 85 investors and advisory

committee members and the

dinner included over 100 people.

Financial reports for the year

ended 30 September 2002 were

sent to investors shortly after the

December meeting. An IK task

force worked over the course of

the year to create a new and

“improved” reporting format,

which is hopefully easier for

investors to read and use and

simultaneously more aesthetically

pleasing.

Beyond the scheduled, official

investor meetings, IK has been

in close and frequent touch

with investors, encouraging

opportunities to have “update”

and “progress” meetings, either

on the phone, or face-to-face.

With the investor in focus, IK

tries to have its ear to the ground

and is working hard to keep

people abreast of developments

in IK’s fund portfolios as well

as in the private equity markets

within which IK operates.

The next IK investor meetings

are on 13 May in New York (for

North American investors) and the

same meeting will be held on 27

May in London (for European and

other non-North American

institutions). Information will be

sent directly to investors with

regard to these events as they

draw closer.

:KNOWLEDGE DEVELOPMENT

:TRANSACTIONS

INDUSTRI KAPITAL ACQUIRES WELZORG A few days before Christmas the

Industri Kapital 2000 Fund finalised

the acquisition of Welzorg from

UBS Capital. Welzorg is the

Dutch market leader in the rental,

distribution and maintenance of

mobility aids. The company’s

main products are scooters and

wheelchairs for use by elderly and

handicapped people. Welzorg’s

market shows significant non-

cyclical growth, in particular due

to demographic changes (the

aging of the population) and

social trends (shift from intramural

towards extramural care).

“We see a strong potential for

the company to further develop its

product and service offerings in

Holland and to expand into

neighbouring markets,” said

Gustav Öhman, Director of IK,

commenting on the acquisition.

“We look forward to working

together with Welzorg’s

experienced management.”

Frank Bangma, CEO of Welzorg,

commented: “We have been

impressed by the manner and

speed in which IK has managed

to gain a deep understanding of

our company, our markets and

our vision for the future of Welzorg.

This gives us great confidence in

the future of the company.”

Welzorg, which is headquartered

in Amsterdam, has a network of

43 sales and service outlets

throughout the Netherlands.

The company had sales of

approximately €143 million in

2002 and employs some 800

people.

INDUSTRI KAPITAL SELLSPAROC TO BANC OFAMERICA EQUITY PARTNERSIn February the IK1997 Fund sold

all its shares in Paroc Group Oy

Ab to a Finnish holding company

owned by a fund administered by

Banc of America Equity Partners.

Paroc, which is one of the leading

manufacturers of stone wool

insulation products and solutions

in Europe, was acquired by IK in

1999.

“The company has shown

excellent development over

the years and the investment

has met our expectations on

return on investment more

than well,” commented

Michael Rosenlew. “During

our ownership, Paroc has

expanded in eastern Europe

and made considerable

investments, especially in

Poland, where the company

has built new production

lines. Together with Paroc’s

experienced and committed

management, we have also

changed the company’s focus

from bulk to more value-added

products such as sandwich

panels and technical insulation

products.”

“The progress we have made

during the past years, along with

expansion, investments and a

realigned product focus, have

created a solid base for the future,”

said Peder Biese, President and

CEO of Paroc Group.”

3 EXITS

3 ACQUISITIONS

2 RE-CAPITALISATIONS

3 PORTFOLIOCOMPANY ADD-ON

ACQUISITIONS

300 RECORDED

INVESTMENT LEADS

200

250

300

150

100

50

100

130% -33%

3% 230

Note: Numbers are indicative

Index

InitialInvestment

EarningsGrowth

MultipleArbitrage

CashGeneration

ExitValuation

EARNINGS GROWTH. The main driverbehind equity value creation in Paroc.

SOME OF LAST YEAR’S accomplishments as reported at the Decemberinvestor meeting.

IK News is published three times a year by Industri Kapital Limited, Brettenham House, 5 Lancaster Place, London WC2E 7EN, England.© 2003 Industri Kapital Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of Industri Kapital Limited. Editor: Anne Holm Rannaleet. Assistant editor: Maria Nilsson. Copy: Joanna Gant. Illustrations: Syster Diesel. Photographer: Mårten Adolfson/Johnér, Mats Hallgren/Johnér, Getty Images. Production: Åkesson & Curry KB,Sveavägen 62, SE-111 34 Stockholm, www.akessoncurry.com.

13 MAYUS Investor meeting, New York

27 MAY Investor meeting, London

Advisory Committee Meeting,

London

DURING JUNE 31 March 2003 Reports

distributed to investors

Next IK News

DURING SEPTEMBERNext issue of IK News

4 DECEMBERAnnual Investor Meeting,

Stockholm

Advisory Committee Meeting,

Stockholm

DURING DECEMBER 30 September 2003 Reports,

including Valuations distributed

to investors

www.alfalaval.com

www.citylink.se

www.consolis.com

www.corob.com

www.cpscolor.com

www.dynea.com

www.dynonobel.com

www.fgroup.com

www.gardena.com

www.intrum.com

www.labeyrie.com

www.nobia.com

www.paroc.com

www.superfos.com

www.welzorg.nl

:WEB LINKS

:CALENDAR

Debbi EikesdalBritish. Assistant, Investor

Relations. Based in London.

Hasna AitissaMoroccan. Office Assistant/

Receptionist. Based in London.

Alison CliffordBritish. Fund Administrator.

Based in Jersey

Maria CascellaItalian. Assistant,

French/Italian/Spanish team.

Based in London.

:PERSONNEL