£6.2m MBO at Notts steel fabricator

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Duke Royalty, the provider of alternative capital solutions, has entered into a £6.2m royalty financing agreement with Meteor HoldCo, which trades as Fabrikat (Nottingham) in Sutton-in-Ashfield.

Formed in 1985, Fabrikat is a fabricator of steel products supplying the UK street lighting and guardrail markets.

Duke’s investment will facilitate a management buyout of two shareholders who, in recent years, have handed over the day-to day-running of the business to the current management team which has a combined tenure in the business of more than 60 years and lead all aspects of Fabrikat’s operations

As part of the recapitalisation, Duke will receive a 30% equity stake in the business

There will be no change to the day-to-day management of Fabrikat.

Neil Johnson, CEO of Duke Royalty, said: “Fabrikat is a well-managed business with a longstanding track record of profitability, making it an ideal royalty partner for Duke. The business’ long history of growing market share and its ability to withstand and successfully navigate challenging environments, including the recent turbulence created by the pandemic, makes us confident of the company’s short and long-term future prospects. Our support of this MBO reflects our confidence in the management team’s ability to continue the success achieved to date and illustrates how effective our capital is in MBO situations.

“Additionally, with Duke’s existing credit facility with Pollen Street Capital, we are well positioned to make more investments in the coming months as we focus on capitalising on the increasing demand for long term, flexible sources of finance.”

Paul Allen, CFO of Fabrikat, said: “Duke’s investment solution has been a great fit for this transaction. By taking on Duke’s capital, the other members of the MBO team and I can assume operational control and a majority equity shareholding in a company where we have worked for most of our careers. We are excited to take Fabrikat forward and build on the excellent reputation of the firm.”

In line with Duke’s other investments, the distribution will be adjusted annually based on the percentage change in total combined gross revenues of Fabrikat for the 12 months to 31 December 2021, compared to the prior financial (calendar) year. The first adjustment will occur from March 2022. The annual adjustment in the distribution will be subject to an agreed collar.

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