HGGC and Charlesbank Capital Partners have signed an agreement to sell their portfolio company Citadel Plastics to strategic buyer A. Schulman for $800 million. The transaction is expected to close before the end of May 2015.
Citadel is a North American specialty engineered plastics company that produces thermoset composites and thermoplastic compounds for specialty product applications in the transportation, industrial & construction, consumer, electrical, energy and healthcare & safety industries. In 2014, Citadel had approximately $525 million of pro-forma revenue and pro-forma EBITDA of approximately $75 million. The company has 1,200 employees and operates 21 manufacturing facilities throughout the world, including 10 thermoplastic facilities in the United States and Canada, and 11 thermoset composite plants comprising seven in North America, one in Germany, one in Brazil, and a joint venture consisting of two plants in China. Citadel is based in West Chicago, IL (www.citadelplastics.com).
Citadel was acquired by HGCC and Charlesbank in March 2012 from Wind Point Partners which in turn had acquired the company in March 2007 and completed six add-on acquisitions during its term of ownership.
During HGGC’s and Charlesbank’s ownership, and in partnership with Citadel management, the company has expanded its capabilities, geographic reach and customer base through both organic growth and strategic acquisitions. Citadel added Lucent Polymers in 2013 and The Composites Group in late 2014. These acquisitions added more than 1,300 customers and over 2,000 products that has grown revenues 70 percent since the initial investment.
“We are extremely proud of the transformation that has taken place at Citadel over the past three years,” said Gary Crittenden, Chairman of HGGC, who also serves as Chairman of Citadel. “Together with Mike Huff and his management team, we have built very attractive industry leading platforms in engineered composites and thermoplastics through important strategic acquisitions, resulting in an outstanding outcome for our investors.”
In addition to the acquisitions, during HGGC’s and Charlesbank’s ownership Citadel made significant strategic improvements. These include launching an industry-focused go-to market strategy, investing in sales resources, implementation of a common operating discipline across the portfolio, and enhanced management of margins and expenses, which collectively strengthened the business.
HGGC makes leveraged buyout, recapitalizations and growth equity investments in middle market companies. The firm invests from $25 million to $100 million in equity per transaction in companies that have revenues of $100 million or more, enterprise values of $100 million to $500 million, and EBITDA of $15 million or more. HGGC is based in Palo Alto (www.hggc.com).
The sale of Citadel, in which HGGC has a controlling interest, marks HGGC’s seventh exit of 11 middle market platform investments made out of its $1.1 billion debut fund and is the firm’s first transaction of 2015 after completing 10 transactions last year. Earlier this month HGGC announced the closing of its $1.33 billion second fund.
Charlesbank Capital Partners, HGGC’s partner on this investment, pursues management-led buyouts and growth capital financings, typically investing from $50 million to $150 million per transaction in companies with enterprise values of $100 million to $750 million. The firm has $3 billion of capital under management and has offices in Boston and New York (www.charlesbank.com).
“With the tremendous advancements that Citadel has made during our investment, the company is strongly positioned for continued growth,” said Brandon White, Managing Director of Charlesbank, who also serves on the Board of Citadel. “We are proud to have partnered with the team during this extraordinary period and wish them every success in their next chapter.”
A. Schulman, the buyer of Citadel, is an international supplier of high-performance plastic compounds, powders and resins. The company had net sales of approximately $2.5 billion for the fiscal year ended August 31, 2014. A. Schulman was founded in 1928 and is headquartered near Akron in Fairlawn, OH (www.aschulman.com).
© 2015 PEPD • Private Equity’s Leading News Magazine • 3-16-15
