3i Group has purchased more than 90% of airport luggage cart service provider Smarte Carte from Fortress Investment Group for USD 385m.
Rob Collins, managing partner for North American infrastructure at 3i Group, told Inframation that he expects the deal to close before the end of the year. The firm has mandated Evercore Partners to refinance the deal, also likely to close before the end of the year.
The USD 385m that 3i has agreed to pay from its own balance sheet includes Smarte Carte’s existing debts. Collins said that under the terms of the agreement, 3i will acquire more than 90% of the ownership of the asset with existing management rolling their equity into a minority stake of less than 10%.
Prior to the transaction, Fortress Investment Group owned 49.9% of Smarte Carte with the management owning 50.1%.
Collins said this represents 3i’s first infrastructure transaction in North America. “From when our team joined 3i from Hastings earlier this year, this asset class was a priority for us. Smarte Carte is a true market leader in the field of airport passenger services with such an entrenched position that it would be very hard for new competitors to break into the space,” he added.
Describing the acquisition process, Collins said: “Although Smarte Carte was considering an auction process, we managed to meet their management team over the last summer and preempted any broadcast auction. While there were multiple other bidders circling the deal at prices above our binding bid, Smarte Carte was keen to find a partner that could help them grow rather than just achieving the best price. 3i is well placed to do that with our ownership of TCR, which provides ground handling services in Europe at more than 100 airports.”
3i will consider growing the business through bolt-on acquisitions of other airport services, Collins said.
He added that another factor playing in 3i’s favor was the decision to appoint Greg Hart, executive vice president and chief operations officer at US airline United Continental Holdings, as an non-executive director. “Greg was responsible for customer service and upgrades to United’s technology infrastructure and digital rollouts and will help guide the future growth of Smarte Carte,” Collins said.
Smarte Carte owns over 140,000 installed luggage cart facilities, lockers and massage chairs across 2,500 locations in the US, Canada, Australia, New Zealand, Sweden, the UK, and Singapore.
Evercore Partners (financial) advised 3i Group on the acquisition and Allen & Overy provided legal advice. William Blair (financial) and Dorsey & Whitney (legal) advised the sellers.
Inframation understands that Smart Carte’s revenues come from five to ten-year contracts with terminal operators, which usually include options to extend. The revenue produced by the company’s activities is shared with the terminal operators.
While not commenting on rumors that 3i Group could launch a new infrastructure investment vehicle focused on the North American market, Collins said that 3i had given the North American team USD 300m in equity seed capital and that the company was happy with the current investment model.
“We are looking at seven significant opportunities in the market currently, mostly bilateral deals like Smarte Carte,” he said.