Investors hope to put spark back into CG Power plant

MML Capital Partners has been cleared by the competition authority to acquire a controlling stake in CG Power Systems. It’s now hoped new jobs can be created at the Cavan Town facility through investment - particularly by tapping into the growing electric vehicle (EV) and renewable energy markets.

At the start of last month state backed MML announced its acquisition of CG Power Systems Ireland Limited (CG Ireland), a specialist manufacturer of distribution transformers located in Cavan Town. The deal is subject to approval.

CG Ireland has been manufacturing in Cavan since 1977, having been established by Pauwels Trafo of Belgium, before it was acquired by CG, part of the Indian-headquartered conglomerate Avantha Group in 2005.

The news was greeted with a mixture of elation and relief by the 410 plus staff working at the Dublin Road plant. It lifted the business out of liquidation after parent company, CG Power Systems Belgium NV, went bankrupt back in February.

In their first interview since agreeing to acquire CG Ireland, MML made its intentions for the future for the local business clear.

The MML investment in CG was led by members of the growth fund’s Irish team including Rory Quirke, partner and co head of investments; Christopher Walsh and Stephen Minogue.

As the largest single equity holder, alongside current management, MML reveals it was first introduced to the CG Ireland business and its managing director Stephanie Leonard in late February, not long after liquidators Kris Van den Berghen, Elke Van Weerdt and Yves Desutter were appointed.

The MML investment was made alongside the management team’s own investment to acquire the business, which achieved revenues of circa €70m in the year up to March 31 last.

While MML have shied away from divulging the full details of the deal reached, or the percentage now controlled by the growth fund, it’s understood they were the management team’s preferred bidder and fended off interest from a number of other interested parties.

“From our initial meetings, the whole MML Ireland team was immediately struck by the resilience of the business and strength of the management team over the past number of years from the well documented challenges in the wider CG Group, which had a direct and significant impact on the Cavan plant,” MML informedThe Anglo-Celtin a comprehensive statement issued to this newspaper.

“We were impressed with how the business has managed to thrive in spite of those challenges, which limited investment into the facility and its ability to compete in certain markets. We recognised the opportunity to partner with management in acquiring CG Ireland and support them in driving the business to achieve its full potential.”

Prior to committing to invest in CG Ireland, and before Covid lockdown kicked in, MML team members visited the Cavan site on three occasions. This included a comprehensive site tour, which allowed MML to understand the operations and the current management’s view of where “opportunities” lie to grow the business further.

“The MML team admired how the business reacted to the pandemic and was impressed with how it got back to being fully operational in such a short period of time, which is a credit not only to management, but to all employees,” they note.

It is anticipated the change of control, with MML at the helm, will facilitate significant investment into the 17,000 sq m plant Cavan plant, something they say had been “difficult to achieve” in recent years under previous ownership.

Typically MML, which boasts support from the Ireland Strategic Investment Fund, AIB and a number of international institutional investors, invests in businesses with a three to seven year time horizon partnering with management.

MML has already significant experience in both the power utility sector, having invested in H&MV Engineering, a Limerick-based high voltage electrical services business, as well as in the manufacturing sector, in Schivo Medical, a Waterford-based manufacturer of medical components.

A key criterion for MML to invest, they say, is the ability for the business to “grow under a strong management”. For CG Ireland, separating the Irish business from the wider CG group will, MML suggest, allow current management to put the business on a “stable foundation for growth”.

As part of that plan MML envisages investing “significant capital” in the Cavan facility, with the aim of broadening CG Ireland’s product offering and further its international market expansion.

“MML has a track record of providing the right level of support to our management partners and we will not have an active role in the operations of the business. MML does not seek to interfere in the day to day running of businesses in which we invest. However, we provide board-level input in our investee companies.”

Rebranding

One change that MML will implement however is that CG Ireland will be rebranded in “due course”. It will continue to service its broad international customer base with its “best in class product portfolio” from its Cavan facility, under an as-yet-to-be-announced new name. It’s understood the board is currently working on a suitable new name which best represents the business in Cavan going forward.

As for the future, MML view increasing demand on European grid networks driven by the roll-out of electric vehicles (EV) and more renewable energy sources for the power utility sector as being “strong” over the medium term.

CG currently manufactures a range of distribution transformers and a diverse range of industrial applications - electrical vehicle charging stations, battery storage, solar, tidal, and both onshore and offshore wind farms.

“We expect and are hopeful, that higher levels of growth will drive increased demand for distribution transformers,” they say. “CG Ireland has the ability to design, in house, products that meet customer requirements in specific growth areas such as electric vehicle charging, renewables, battery storage.

“Key to the Cavan plant’s success is the end to end in-house manufacturing which encompasses heavy metal fabrication and high precision core cutting technology which is best in class, in addition to a highly skilled, local workforce of in excess of 400 personnel.”

Research & Development

“Significant investment has been made and will continue to be made, in training, alongside research and development, which the IDA and going forward, Enterprise Ireland, having been instrumental and very supportive in,” commits the new investor.

While other interested parties in the bidding process for CG Power had proposed narrowing the product lines from the plant, thus potentially reducing employee numbers as a result, MML say they are excited to implement a plan that could “increase manufacturing” of new and innovative products in the Cavan facility.

“As the business grows, we would expect that there will be a requirement for new jobs to help service that growth,” states MML, which adds that the business now needs time to “stabilise” under new ownership.

“We expect and are excited to be part of a financially strong shareholder base that initially will stabilise the business through securing employment but will also invest in this plant’s future.”

The Competition and Consumer Protection Commission (CCPC) has now cleared the deal and the investment in the company is complete.