Cairngorm buys Scottish timber merchant in debut Fund II deal

The UK-focused firm, which specializes in "relatively undermanaged" companies, is largely backed by US endowments and European funds of funds.


In the first investment from its second fund, UK-focused Cairngorm Capital Partners has acquired Scottish timber processing and distribution company Thornbridge Sawmills.

Capital for the investment came from Cairngorm Capital II, which closed on £107.5 million ($140.9 million; €121.5 million) in April after securing investments largely from US endowments and European funds of funds.

Financial details were undisclosed.

The firm targets “relatively undermanaged” UK manufacturing, distribution and service businesses with operating profits of between £2 million and £20 million, managing partner Andrew Steel told sister publication Private Equity International in April.

Thornbridge was founded in 1992 and provides a range of sustainable timber products to customers that include local construction companies, home remodeling enthusiasts, public works contractors and others. The company imports timber from markets including Northern Europe, the Baltic States, North and South America and reported £35 million in revenues last year.

It maintains a combined saw mill and distribution hub in Grangemouth, Scotland and a network of eight branch offices throughout the country.

“We are delighted to help Thornbridge in its next stage of growth and will be investing additional funds to scale the business rapidly,” said Neil McGill, Caingorm’s investment director and head of the firm’s Edenborough office.

The firm said the investment in Thornbridge was an outgrowth of the firm’s “ongoing commitment to the region and its contribution to the growth of the local business sector.”

The jobs factor

Forest Research Group economist Jack Lutz told Agri Investor that in the past, struggling mills have been purchased by local governments and trade unions as part of efforts to save jobs in struggling regions. Given the low level of recent investor demand for mill investments, Lutz speculated that protecting local jobs may have been a significant factor in Caingorm’s Thornbridge acquisition.

About a decade ago, he explained, private equity-backed paper milling companies such as Apollo’s Verso Paper and Cerberus’s NewPage went on a buying spree, acquiring mills being sold by large timber investment management organizations aiming to consolidate. In the time since, he said, the remaining large TIMOs have separated their hard and softwood mills from their timberland operations into distinct entities as a sharp decline in paper demand stemming from changes in news consumption has further challenged the entire milling industry and sapped private equity interest.

“Some large Canadian lumber companies have been buying mills in the [US] South, but it doesn’t appear that private equity people have been making a big splash in the wood products business,” Lutz said. “There might be some company somewhere buying a saw mill somewhere, but it hasn’t been the big splash that it was a decade ago.”