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Arx Equity Partners (“ARX”), the leading lower mid-market private equity firm focused on Central and Eastern Europe, has completed the € 102 M second close of its third fund, ARX III, on schedule to reach its € 125 M target. ARX III completed its € 83 M first close in October 2008 from a number of blue chip global financial institutions. ARX has been successfully investing in CEE since 1998.

The fund’s core focus continues to be succession-driven buyouts, where ARX has an established track record as a valued investment partner. ARX has a strong locally based team and has completed more buyouts to date than any private equity group in the CEE lower mid-market.

In recent years, CEE has become an increasingly attractive market for investment and, selectively, continues to offer risk-adjusted value creation opportunities. EU membership has brought financial stability for core CEE countries. The geographic proximity of CEE to the markets of Western Europe, coupled with highly skilled and lower-cost labour markets have contributed to rapid economic growth. In addition, the maturing legal and financial framework has enabled leveraged buyouts to become more established.

The lower end of the mid market offers a multiplication of investment opportunities compared to the larger end, with significantly less competition. ARX III has already made 2 investments; Kakadu, a leading Polish pet product retailer and Lexum, a healthcare business based in the Czech Republic. The fund will continue the proven investment strategy of previous funds, focusing on stable, cash-generative mid-market businesses across the CEE region. Equity investments in the fund will range between € 3 M – € 15 M, with deal enterprise values ranging between € 10 – € 50 M.

ARX, formerly known as DBG Eastern Europe, was sponsored by Deutsche Beteiligungs AG from inception through early 2008. ARX is now fully independent. Its first two funds, DBG I and DBG II raised € 46 M and € 67 M in 1997 and 2003 respectively. DBG I returned € 190 M net to investors, and ranks as one of the best performing funds in the CEE region. To date, DBG II’s current portfolio has demonstrated resilience to the current economic downturn, with no write-offs, limited write-downs plus three profitable full or partial exits.

Jacek Korpala, Co-Managing Partner, ARX commented:

„We perceive the current investment environment in CEE as particularly attractive for established investors who really understand the local market. Acquisition finance is still available in certain CEE countries, for lower mid-market deals, and while there are few alternative sources of exit liquidity, there are also a large number of business owners who have over-extended into non-core ventures. All of these factors play to our proven strengths.”

Brian Wardrop, Co-Managing Partner, ARX commented:

„We are delighted to have achieved the second close of ARX III, on target, and in an extremely difficult fundraising environment. Our ability to attract new investors, while continuing to maintain interest from investors in our earlier funds, shows the strength of our market leading track record, as well as the attractiveness of our investment model in the current environment. Even though ARX III is larger than our previous funds, we remain firmly focused on our target investment size and market, namely established small to mid-sized businesses across CEE.”

On April 23, 2009, Professor Martin Filipec and ARX Equity Partners (“ARX”) completed the leveraged acquisition of 100% of the Lexum Group of companies (“Lexum”). Lexum is the leading network of private ophthalmology clinics in the Czech Republic.

Lexum currently operates clinics in Prague, Ostrava and České Budějovice, with a Brno clinic scheduled to open in summer 2009. In 2008, Lexum successfully performed over 11,000 cataract operations and over 5,700 laser refractive corrective procedures. Lexum is the clear Czech private eye surgery market leader, both in terms of medical reputation and size.

Lexum was founded in 1993 by Professor Filipec, who was Chair of the Department of Ophthalmology at the Teaching Hospital and the 1st Medical Faculty of Charles’ University (Prague), following a fellowship at Harvard Medical School (Boston) and studies at Hôtel Dieu (Paris). Professor Filipec stated, “my partnership with ARX has created a streamlined ownership structure, which will provide a solid foundation for continued client service excellence, while facilitating the next growth phase for Lexum”.

ARX will work in partnership with Professor Filipec to expand Lexum both within the Czech Republic and potentially in other markets of Central and Eastern Europe. “ARX is privileged to work with the world-class team of medical professionals at Lexum; and we look forward to implementing the company’s growth strategy alongside Professor Filipec”, said ARX Co-Managing Partner Brian Wardrop.

Senior acquisition debt facilities for the transaction were provided by LBBW Bank (Czech Republic).

On March 6, 2009, ARX completed the acquisition of controlling stake in Kakadu Sp. z o.o. The investment is shared between the two funds managed by ARX: DBG Eastern Europe II LP and ARX CEE III LP.

Kakadu (www.kakadu.pl) is a leading pet products retail chain in Poland. The company operates 25 stores located in large cities.

ARX and the Kakadu management intend to strengthen the company’s market leadership by implementing operating improvements, the roll out of new stores and add-on acquisitions.

Kakadu is on track to exceed EUR 20 million in 2009 sales.

Lanex / Singing Rock Acquisition:

On September 26, 2008, Arx completed the acquisition of Lanex a.s. and Singing Rock s.r.o.

Lanex (www.lanex.cz) is a leading Central European producer of technical textile ropes and flexible packaging. The company’s strategy is increasingly focused on technologically advanced segments of the rope industry.

Singing Rock (www.singingrock.com) is a world-renowned player in the personal fall protection and climbing equipment market.

ARX and the Lanex and Singing Rock management teams intend to capitalize on the complementary strengths of each business with the aim of building a leading global player in the rope and climbing equipment market. The combined Lanex / Singing Rock business is on track to generate € 42 M in 2008 sales. Both Lanex and Singing Rock are headquartered in the Czech Republic.

ČSOB and UniCredit banks provided acquisition financing for the transaction.

Donit Tesnit Exit:

ARX is also pleased to announce the successful exit from Donit Tesnit doo, which was completed on September 1, 2008. ARX has exited its investment in Donit Tesnit doo via a sale of 100% of the company to an affiliate of Mohar Satler Investments. ARX generated a return of 3.0 times cash invested and an IRR of 58% on its 2006 investment in the company.

Arx Equity Partners (“ARX”) held the first close of its third dedicated Central and Eastern Europe focused lower mid-market fund at € 83 million. ARX is targeting € 125 million for the fund’s final close. ARX III’s largest first close commitments came from the European Bank for Reconstruction and Development, the European Investment Fund and Alpha CEE II (a fund managed by Alpha Associates).

ARX III is the successor fund to DBG Eastern Europe II LP. DBG Eastern Europe rebranded as ARX and became fully independent in early 2008.

The ARX team of eight professionals is led by co-Managing Partners Jacek Korpala and Brian Wardrop. „ARX III represents a continuation of the strategy we have pursued over the past several years with DBG II; and our geographic focus and investment style are well-suited for the current market environment”, said Korpala. Wardrop added, „succession-driven dealflow in the CEE region is increasing for several fundamental reasons, and ARX is ideally positioned to capitalize on these opportunities”.

ARX III will target equity investments of € 3-15 million per transaction.
Recent ARX events reinforce the attractiveness of the CEE lower mid-market segment. On September 1, 2008, ARX completed an exit from its investment in Donit Tesnit in Slovenia, realizing a cash-on-cash return of 3 times and an IRR of 58%. Then, on September 26, 2008, ARX completed the concurrent acquisitions of two complementary businesses in the Czech Republic (Lanex a.s. and Singing Rock s.r.o.), in a succession-driven buyout. ARX secured acquisition financing for the transaction from ČSOB and UniCredit banks.

Funds managed by Arx Equity Partners (“ARX”) supported Tomplast d.o.o., a Slovenian plastic components producer, to perform an add-on acquisition of Unitplast d.o.o..

On April 25, 2008, Tomplast, backed by ARX, completed the add-on acquisition of a 100% ownership interest in Unitplast. ARX has held a controlling stake in Tomplast since July 2007, when the company was acquired in partnership with Mr. Mark Stemberger in a management buy-in transaction.

Tomplast is a Slovenian manufacturing company, which acts primarily as a tier two supplier of plastic components for the automotive and leisure industries.

Unitplast is a producer of rubber and plastic components located in Semič, Slovenia. On a pro-forma basis the acquisition of Unitplast will more than double Tomplast’s 2008 revenues.

Axon Leasing and Financial Zrt. (“Axon” or the “Company”), the largest non-bank-owned leasing company in Hungary announced today that it has received equity funding from ARX (formerly branded as DBG Eastern Europe), a mid-market focused CEE private equity firm and 3i, the London FTS100 private equity fund, who acted through 3TS Capital Partners in the transaction. The investment was made through a Cyprus-domiciled investment vehicle. The investment, containing both a stock purchase as well as a substantial contribution to Axon’s share capital, totals € 9 M. In addition to this amount, the private equity investors earmarked € 6 million for further expansion in the future.

Axon maintains a solid market position in certain well-defined segments of the leasing market such as the financing of commercial vehicles, machinery and boats. Axon was founded in 1991, and currently ranks among the Top 10 Hungarian leasing companies in truck leasing; is also strong in equipment leasing; and is the market leader in a niche segment: boat leasing. Axon is active in both financial and operational leasing. Axon expects to finance new leasing assets of around € 40 M in 2007 and has a leasing portfolio of € 75 M.

Axon’s core customer focus is the SME market segment, which tends to be under-funded, due to the fact that many SMEs have limited collateral to secure bank loans. Therefore, leasing should assist in driving the growth of the SME segment in Hungary. The current ARX / 3i equity infusion will propel Axon through its next phase of growth and expansion. The new funding will enable Axon to expand into new geographic and product areas. Axon will strengthen its market presence in Western Hungary and is planning to expand into Romania and possibly Serbia or Croatia. Axon sees great potential in its recently launched new division focusing on real estate leasing.

„As an independent leasing company you need to provide superior, value-added service to clients in order to be able to compete with the bank owned leasing firms. Our people are Axon’s greatest assets and we are constantly looking for new talent and experienced professionals. We are very happy to have found such partners as ATX/3i/3TS who are not only committed to support us with funding but also help the development with other important business aspects” – stated Zoltan Kun, Founder & CEO of Axon.

Slovenian plastic components producer, Tomplast d.o.o., has been acquired by DBG Eastern Europe II, LP (“DBG”). Tomplast is one of Slovenia’s leading manufacturers of plastic-moulded components.

On July 6, 2007, DBG completed an MBI of a 100% shareholding in Tomplast d.o.o. The acquisition of Tomplast is DBG’s second Slovenian manufacturing buy-out investment in the past two years.

Tomplast is a Slovenian manufacturing company, with a primary strategic focus as a supplier of plastic components mainly to the automotive industry. The MBI team that has partnered with DBG in the Tomplast acquisition is led by Mark Stemberger. DBG and Mr. Stemberger intend to grow Tomplast in the coming years organically and potentially via acquisitions. The transaction size was not disclosed.

Merger of companies controlled by DBG Eastern Europe II LP: Ergis S.A. and Eurofilms S.A. (the latter quoted on the Warsaw Stock Exchange) is a fact. The Court registered the merger on 29 June. In effect it was created one of the largest plastic processing companies in Central Eastern Europe, with the total annual net revenue surpassing PLN 390 M.

On 29 June 2007, the Warsaw District Court registered the merger of Eurofilms S.A., the leading manufacturer of stretch films in Poland, producer of thermo-shrinking PVC films and distributor of BOPP films and PET tapes, with the Company’s majority shareholder – Ergis S.A. – the largest in Poland and the leading in Central Eastern Europe manufacturer of PVC based products (films, compounds, wallpapers, wall panels and windowsills). The merger was approved by shareholders of Eurofilms and of Ergis at their respective general meetings in May. The new entity is operating under the name Ergis-Eurofilms S.A. The leading shareholder of the merged entity is Finergis Investments Ltd, which in turn is controlled by DBG Eastern Europe II LP.

Strategic development objective of the merged companies is to strengthen its leading position in manufacturing of films and processing plastic in Central Eastern Europe.

Jacek Korpala, Partner at DBG, said: „We are glad that it was possible to effect the merger efficiently, fast and with support of the companies’ shareholders. We are looking forward for further fast development of the merged companies, both organically and through acquisitions. We believe that Ergis-Eurofilms S.A. will be a fruitful investment for all of its shareholders.”

Komex Sp. z o.o. (“Komex” or “the Company”) – a chain of retail stores offering children clothing under the brand name “5.10.15” has been acquired by DBG Eastern Europe II LP (“DBG”) and 3TS Central European Fund II (“3TS”).

On 17 August 2006 DBG and 3TS completed a transaction acquiring a majority shareholding in Komex. The Company is the operator of over 50 stores under the brand name “5.10.15”. Komex is one of the largest retail chains of stores in Poland offering exclusively children’s clothing. DBG and 3TS acquired shares from the existing shareholder and increased capital to finance further expansion.

Jacek Korpala, a Partner at DBG and Zbigniew Łapiński, 3TS Director stated, „We are impressed by Komex’s development over the last few years, which transformed the Company from small retailer to a significant player in its market segment. We believe that Komex is well positioned to maintain its high growth in the future through continued expansion of its presence in the larger Polish cities at the same time retaining a high quality of products offered.