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Fridman-backed Pamplona buys Beacon Rail
From the Financial Times of Mon, 05 May 2014 15:49:33 GMT

Pamplona Capital Management, the London-based investment firm backed by Russian billionaire Mikhail Fridman’s Alfa Group, has purchased UK-based locomotive leasing company Beacon Rail Leasing, marking the second private equity investment in the sector in Europe in less than two months.

The acquisition from Mitsubishi UFJ Financial of Japan, valued at about $450m, follows an investment by KKR in March to back a European train leasing venture and shows investors are seeking to take advantage of the liberalisation of rail traffic in the region.

Pamplona, which was set up in 2005 and manages private equity and hedge funds, is sealing its third acquisition in the UK after an unsuccessful attempt earlier this year to buy Innovia , a British maker of polymer-based substrate for banknotes used by central banks around the world.

Exclusive talks with the seller, Arle Capital, collapsed after the UK government demanded it approve controlling investors in the supplier as one of the conditions to award a contract to provide the material for new £5 and £10 notes to the Bank of England, according to people with knowledge of the matter.

Beacon, which is based in London and has offices in Boston and Rotterdam, currently has locomotives, freight wagons and passenger trains on lease in the UK and across Europe, Pamplona said. It has also ordered 15 locomotives from Spanish train maker Vossloh España for lease to Direct Rail Services, the UK nuclear freight unit of the Nuclear Decommissioning Authority.

Other clients include Rhein Cargo in Germany and Europorte in France. Ted Gaffney, president of Beacon, will continue to head the company.

“Operators are increasingly leasing locomotives and rolling stock as the rail transportation market grows driven by deregulation and a growing focus on efficient alternatives to road transportation,” said Robert Warden, the New York-based partner at Pamplona who led the investment.

In the UK, Pamplona, which invests a €2bn private equity fund, owns Oakwood, which manages two portfolios of UK residential mortgages, purchased in 2010, and KCA Deutag, a drilling and engineering service provider to the oil and gas sector acquired in 2008. Both investments could be exited within the next 12 months. Pamplona last year bought French funeral service group OGF and acquired last month a majority stake in Alvogen, a US-based generics drugmaker.

Evercore Partners and ING Bank acted as financial adviser to Pamplona for the Beacon deal. ING also provided debt financing.

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