Information on the Target

Celtic Linen, a prominent laundry service provider, has been a key player in the Irish textile rental and laundry industry. Established to serve various sectors, including hospitality and healthcare, Celtic Linen has demonstrated a strong commitment to service excellence and operational efficiency. After being acquired by Causeway Capital in December 2016 amidst Examinership, the company underwent significant transformation and expansion, ultimately positioning itself as a competitive entity in the marketplace.

Under Causeway's stewardship, Celtic Linen significantly increased its revenue from €15 million in 2017 to over €30 million by 2023. This remarkable growth can be attributed to strategic investments, including upgrades to energy efficiencies, the acquisition of a smaller competitor, and securing new contracts, which collectively enhanced its profitability and market presence.

Industry Overview in Ireland

The textile rental and laundry industry in Ireland is experiencing a robust growth trajectory, fueled by a rising demand for outsourced services across various sectors. The partnership between businesses and laundry service providers is increasingly viewed as a strategic move to streamline operations and reduce overhead costs. As hotels, restaurants, and healthcare facilities recover from the impacts of the COVID-19 pandemic, the need for reliable and efficient laundry services has intensified, further driving the industry's expansion.

In recent years, sustainability has emerged as a pivotal focus within the industry, pushing companies to adopt eco-friendly practices and invest in energy-efficient technologies. This shift not only helps businesses comply with evolving regulations but also appeals to environmentally conscious consumers who are increasingly prioritizing sustainability in their purchasing decisions.

Additionally, advancements in technology are reshaping how laundry services operate, with automation and digital solutions enhancing productivity and service quality. The move towards adopting innovative practices is expected to bolster growth within the Irish laundry sector as operators seek to meet the needs of a changing marketplace.

Overall, the fabric of the Irish textile rental and laundry industry is evolving, presenting substantial opportunities for growth and investment for operators who can adapt to these new challenges and customer expectations.

The Rationale Behind the Deal

The decision to sell Celtic Linen to Johnson Service Group (JSG) for €31.5 million in September 2023 was strategically aligned with Causeway Capital's objectives to realize strong returns for its investors. This transaction not only marked a successful exit for Causeway but also reflected the significant enhancements made to Celtic Linen's operational capabilities and overall market position during its ownership.

By divesting Celtic Linen at this stage, Causeway was able to crystallize a 3x return on investment, a clear indicator of the value added during its investment period. Furthermore, the deal allows JSG to inherit a thriving business that fits well within its existing portfolio, providing additional resources and capabilities to drive further growth.

Information About the Investor

Causeway Capital is an esteemed investment firm with a strong track record in identifying and nurturing businesses with substantial growth potential. Known for its strategic focus and hands-on management style, Causeway has a history of guiding companies through critical transitions, improving operational efficiencies, and preparing them for successful exits. Their involvement in the healthcare services sector, particularly with companies like Celtic Linen, showcases their expertise in capitalizing on market opportunities during dynamic economic times.

With a keen eye for value creation, Causeway Capital has garnered admiration from investors and industry stakeholders alike for its ability to navigate complexities and deliver exceptional returns. Their strategic decision-making and impactful investments have cemented their reputation as a leader in the field of private equity and investment management.

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The exit of Celtic Linen to Johnson Service Group can be viewed as a commendable investment on Causeway Capital's part. The substantial return realized reflects the thorough due diligence and strategic initiatives undertaken during the investment period. By prioritizing operational improvements and aggressively pursuing growth opportunities, Causeway successfully repositioned Celtic Linen in a competitive market.

Furthermore, the continued investment commitment from JSG indicates a strong belief in the long-term potential of Celtic Linen. The planned €1.9 million capital investment at the Wexford plant demonstrates a proactive approach to enhancing efficiency and sustainability, which are critical factors for future success in the industry.

In conclusion, this deal not only signifies a profitable exit for Causeway Capital but also highlights the transformation and value creation achieved during their investment. The strategic alignment of Celtic Linen with JSG's operational capabilities lays a solid foundation for continued growth, making it a prudent investment decision for both parties involved.

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