Direct Capital

The Portfolio

Direct Capital Partners

Company		Year Invested	Company Description
Business Tasman manufactures, markets and distributes various building products supplying the resident, commercial and industrial building industries. The businesses include Insulation and Roofing operations in New Zealand, Insulation, Sinkware and Flooring operations in Australia and Roofing operations in USA. Direct Capital Partners invested NZ$6.55 million in Tasman Building Products in April 1998 in conjunction with two private equity co-investors as part of a trans-Tasman management buyout from Carter Holt Harvey Limited by existing management. At the time the purchase set a benchmark for buyout deals by financial investors in Australia and New Zealand. The size of the deal and its complexity, with three businesses in Australia and two in New Zealand, set this management buyout apart from others. As the business included a significant presence in New Zealand, Direct Capital were able to provide other investors with extensive industry and commercial insight at the time of acquisition and on-going. Strategy The objectives under new ownership and empowered management were to: Improve operational efficiencies particularly with regard to working capital management Continue to grow the business. Outcome As a result of the success of the business, significant debt reduction and a positive sector environment management were able to complete a secondary buyout in September 2001.	Tasman Buidling Products Limited	1998	Tasman manufactures, markets and distributes various building products supplying the resident, commercial and industrial building industries.
Business Eftpos NZ Ltd is the country’s leading player in the rental, installation and service of Eftpos terminals. Eftpos operates a multi-product business model, supplying any of five brands of Eftpos terminal available in New Zealand to customers. Strategy In 1997 Direct Capital Partners made an investment to support its continued expansion. Direct Capital believed that Eftpos was a well managed company with an excellent brand. It had demonstrated an efficient and extensive distribution infrastructure and utilised leading edge software technology to deliver exceptional customer service. Outcome In June 2000, Eftpos was sold to ANZ.	Eftpos	1997	Eftpos NZ Ltd is the country’s leading player in the rental, installation and service of Eftpos terminals. Eftpos operates a multi-product business model, supplying any of five brands of Eftpos terminal available in New Zealand to customers.
Business Established in September 1989 as the distributor in New Zealand for General DataComm Corporation of the USA, the OPEN Group is a Wellington-based company that designs, manufactures and integrates solutions that enable network service providers to deliver Internet / e-Commerce services to their customers. The OPEN Group built a significant Australasian based research and development capability that created competitive advantages through building internationally competitive products while operating in a lower cost environment. Both Telecom New Zealand and Telstra (Australia) are significant customers that drive a major part of the R&D program. The OPEN Group provided products and services to both the network service provider and enterprise network markets with a focus on complex high-value projects. The core products at the time of Direct Capital’s investment were ISDN, IDSL, E1 and HDSL local loop access products used by telecommunications companies to provide digital network services to their leased line customers. Direct Capital supported a management buyout of OPEN Holdings Limited in September 1997.	Open Holdings Limited	1997	The OPEN Group is a Wellington-based company that designs, manufactures and integrates solutions that enable network service providers to deliver Internet / e-Commerce services to their customers.
Business Ryman Healthcare Ltd was founded in 1984 by John Ryder and Kevin Hickman with a clear objective - to become the leading provider of healthcare facilities for the elderly in New Zealand. Ryman’s core activities are the development, construction, and operation of integrated retirement facilities for the long stay care of the elderly. Facilities include retirement villages, resthomes, and hospitals. Ryman’s customer base is those aged between 75 and 84 which is the sector of the elderly care industry experiencing the most dramatic population growth. Strategy Ryman’s activities were originally confined to the South Island of New Zealand until an injection of NZ$15m in February 1997 by Direct Capital and Ngai Tahu Equities Ltd, which allowed Ryman to expand into the North Island and commence development of two new retirement village complexes. The expansion led to Ryman more than doubling its after tax profit to NZ$6.2m for the March 1999 financial year. Outcome Ryman raised NZ$25m by way of an IPO in July 1999 to expand its operations in the North Island, listing on the New Zealand Exchange (NZX). Ryman Healthcare has continued to expand strongly and has been one of the strongest performers on the NZX in recent years. Its market capitalisation now exceeds $1.25bn.	Ryman Healthcare Limited	1997	Ryman Healthcare Ltd was founded in 1984 by John Ryder and Kevin Hickman with a clear objective - to become the leading provider of healthcare facilities for the elderly in New Zealand.
Business Communicado was best known for its production of what was New Zealand’s highest selling film, Once Were Warriors, but its earnings were in fact generated from a much broader base than just film and TV production. Its biggest business was in-flight entertainment for airlines, followed by corporate videos and education, and domestic TV. Strategy Direct Capital invested new capital into the business to fund growth opportunities in in-flight entertainment, corporate videos, international TV and Singapore. Its investment gave Communicado the financial capability to undertake larger projects. Outcome Direct Capital sold its stake in Communicado in 1998 to an international private equity group.	Communicado	1996	Communicado was best known for its production of what was New Zealand’s highest selling film, Once Were Warriors, but its earnings were in fact generated from a much broader base than just film and TV production.
Business Genesis Research and Development Corporation Ltd is a research based biotechnology company, with a primary aim of making new discoveries in the fields of immunology and plant compounds. At the time of initial investment, the major areas of research included: The search for cytokines and their role in several types of tuberculosis, arthritis, asthma, psoriasis and lupus. The development of vaccines effective in the prevention of tuberculosis. Strategy Genesis followed the standard US model in its early years, endeavouring to generally have financial resources on hand to meet its capital requirements for two years. Direct Capital Partners invested NZ$2.75m for a 13% equity interest in May 1996 and was the first New Zealand financial investor on the shareholder register. Outcome Direct Capital exited in September 2000 upon Genesis' listing on the New Zealand Exchange (NZX).	Genesis Research and Development	1996	Genesis Research and Development Corporation Ltd is a research based biotechnology company, with a primary aim of making new discoveries in the fields of immunology and plant compounds.
Business Pacific Flight Catering is one of two air catering businesses operating in Auckland and provides in flight meals for number of the leading airlines that operate in and out of Auckland airport. When London based conglomerate P&O announced a restructuring and a return to its core business, it was clear that its flight catering operation in New Zealand would be sold. An MBI team was assembled, exclusivity negotiated and the acquisition of Pacific Flight Catering (PFC) completed in April 1996.	Pacific Flight Catering	1996	Pacific Flight Catering is one of two air catering businesses operating in Auckland and provides in flight meals for number of the leading airlines that operate in and out of Auckland airport.
Business Blue Star was established by New Zealand technology investor, Eric Watson, in 1991. Blue Star, at the time of investment, had two main operating divisions, Blue Star Office Products (BSOP) and Blue Star Office Automation (BSOA). BSOP was New Zealand’s market leader in office supplies while BSOA focussed on office machines and telecommunication hardware. Blue Star focussed on a strategy of consolidating fragmented ownership in the Australasian market to become Australasia’s largest multi-branded office product and automation re-seller. Strategy In 1995, Blue Star was successful in acquiring the Customer Premises Equipment (CPE) business division from Telecom. Direct Capital’s investment facilitated the acquisition of this business and follow-on acquisitions during 1995 and 1996. The acquisition of Telecom’s CPE division proved to be the catalyst for Blue Star’s rapid growth from 1995. This division was responsible for the provision of CPE services to approximately 10,000 small and medium sized businesses. Outcome Direct Capital worked closely with Blue Star through its follow-on investments and was instrumental in implementing new IT and financial reporting initiatives and the appointment of a new CFO. Blue Star Group was successfully merged with US Office Products in 1996.	Blue Star Group Limited	1995	Blue Star was established by New Zealand technology investor, Eric Watson, in 1991.
Business The history of Nobilo in New Zealand goes back to the early 1940's when the Nobilo family landed in New Zealand. They settled in Huapai, West Auckland, situated in the North Island of New Zealand, and started planting vines in 1943. Subsequently, Nobilo created a modern winery at Huapai which covered all its processing requirements and the business had worldwide potential for the Nobilo’s wines under the Nobilo and White Cloud brands. Strategy The overall strategy was to grow Nobilo into a NZ$50 million business both organically and by acquisition. From 1995 Direct Capital Partners injected a total of NZ$4.5 million of new equity to support the vision of the founding shareholders. This capital also enabled a joint investment in National Liquor in February 1996 alongside BRL Hardy, Australia’s second largest wine company. In May 1998 Nobilo acquired Selak Wines and merged with National Liquor to create one of New Zealand’s largest integrated wine businesses. Outcome In December 1998 Nobilo went on to float shares on the New Zealand Stock Exchange and raised $7.0 million of new capital. Nobilo merged with BRL Hardy in June 2000.	Nobilo	1995	The history of Nobilo in New Zealand goes back to the early 1940's when the Nobilo family landed in New Zealand. They settled in Huapai, West Auckland, situated in the North Island of New Zealand, and started planting vines in 1943.
Business PC Direct manufactured, distributed and supported personal computers under its own brand in New Zealand. Its sales channel was the direct, phone-based, channel by-passing the reseller network. Commencing business in 1989, the company grew from revenues of NZ$18m in 1993 to NZ$45m in 1995 when Direct Capital invested. This growth was leveraged off the company’s integrated system – linking design, inventory, production, sales, despatch, service and accounting. The systems developed by PC Direct provided one of the company’s main competitive advantages. Strategy Direct Capital Partners’ investment was the first financial investor funding introduced to the company, providing the expansion capital required to expand its New Zealand operation and also to acquire the PC Direct business in Australia. Outcome Following the acquisition of the Australian business, PC Direct was merged with US Office Products in 1996. Prior to divestment by its founding shareholders and Direct Capital, PC Direct held the number one market position in the desktop personal computer market and number two behind Compaq in the total PC market.	PC Direct	1995	PC Direct manufactured, distributed and supported personal computers under its own brand in New Zealand.
Business Sky City is New Zealand’s premier gaming and entertainment company, with gaming and cinema interests throughout New Zealand and Australia. In 1995 it was a single casino operation in Auckland New Zealand. At that time the Sky City complex was under construction, the licence/regulatory issues were completed, a statutory monopoly period had been negotiated, and the business being established was an exact replica of successful models offshore. In July 1995 Direct Capital Partners invested NZ$12.3m in the purchase of existing shares in Sky City, representing a 3.0% interest. Strategy Sky City owners, Brierley, wished to sell down existing equity in the unlisted company. Although it was an unlisted company and did not fit the mandate perfectly, Direct Capital was able to assist with the preparations for the listing of the company on the NZX. Outcome During 1996 Direct Capital Partners sold its shares on the NZX through a series of on-market transactions. The investment return to Direct Capital was 1.5 times invested capital and an IRR of 84%.	Sky City	1995	Sky City is New Zealand’s premier gaming and entertainment company, with gaming and cinema interests throughout New Zealand and Australia.