KPS Capital Partners has signed an agreement to sell its portfolio company Electrical Components International (ECI) to Cerberus Capital Management. According to a source familiar with the transaction, KPS earned a return of more than 3 times its invested capital on this transaction.
ECI is a manufacturer of wire harnesses and control boxes and a provider of assembly services for consumer appliance and specialty-industrial applications. The company’s products are used by more than 500 customers in a variety of electronic and electromechanical applications in the home appliances, agriculture and construction, heating, ventilation and air conditioning (HVAC), specialty transportation, automotive, commercial appliance and commercial electronics markers.
ECI has 35 manufacturing facilities, 19 distribution centers and sales and engineering offices located in North America, South America, Asia, Europe and Africa. The company, founded in the 1950’s, has approximately 20,000 employees worldwide and is headquartered in the St. Louis suburb of Creve Coeur (www.ecintl.com).
ECI was formed in 2006 when Clayton, MO-based Viasystems Group sold its wire harness business to Francisco Partners for $320 million. The Viasystems wire harness business was renamed Electrical Components International and operated as a stand-alone company under Electrical Components International Holdings, a portfolio company of Francisco Partners. ECI filed a prepackaged bankruptcy in March 2010 and emerged in May 2010 after swapping debt for new equity. ECI was acquired by KPS in May 2014.
During KPS’ term of ownership, ECI completed three add-on acquisitions: in January 2015 it acquired Global Harness Systems, an Atlanta, TX-based manufacturer of wire harnesses and panel assemblies for the bus, power generation, specialty vehicle and marine equipment end-markets. Global Harness Systems had approximately 800 employees at the time of acquisition; in May 2016 ECI acquired Whitepath Fab Tech, an Ellijay, GA-based supplier of control boxes, wire harnesses, and assembly services to the HVAC industry. Whitepath Fab Tech had approximately 260 employees at the time of acquisition; and in February 2017 ECI acquired Fargo, ND-based Fargo Assembly Company, a maker of heavy-duty, complex wire harnesses used by motorcycle, agriculture and construction equipment OEMs. Fargo Assembly had approximately 1,900 employees at the time of acquisition.
“The success of our investment in ECI demonstrates KPS’ ability to see value where others do not, to buy right and to make businesses better,” said Raquel Palmer, a Partner of KPS. “KPS, in partnership with management, completely transformed ECI from a wire harness supplier focused on the appliance end-market to a diversified manufacturer of value-added components serving a broad range of industrial end-markets. Under KPS’ ownership, the company completed three highly synergistic acquisitions, invested in new manufacturing facilities globally, more than doubled the size of its customer base and significantly expanded its presence in specialty-industrial end-markets. We take immense pride in the company’s accomplishments. ECI is another example of KPS’ investment strategy achieving success across economic cycles, geographies and industries.
“KPS was the only investor to recognize the potential value of our business in 2014. Working in partnership with KPS, we invested significantly in our people and operations, focusing on employee engagement, manufacturing excellence and providing best-in-class product quality and support to our global customer base,” said David Webster, Chief Executive Officer of ECI. “We are grateful to KPS for providing our team with the expertise, capital and resources needed to acquire and integrate three acquisitions and to further our culture of continuous improvement.”
KPS Capital Partners is the manager of the KPS Special Situations Funds, a group of private equity funds with approximately $5.4 billion of assets under management that invests in restructurings, turnarounds and other special situations. KPS targets manufacturing and industrial companies that are going through a period of transition or experiencing operating or financial difficulties. The firm’s portfolio companies have aggregate annual revenues of approximately $7 billion, operate 165 manufacturing plants in 31 countries, and employ over 50,000 people worldwide. KPS Capital Partners is headquartered in New York (www.kpsfund.com).
Cerberus has approximately $34 billion of capital under management and invests in three strategies: global credit opportunities (which includes non-performing loans, corporate credit & distressed debt, mortgage securities & assets, and direct lending); private equity; and real estate. The firm was founded in 1992 and is headquartered in New York (www.cerberuscapital.com).
Barclays was the financial advisor to KPS and ECI on this transaction.
The sale of ECI to Cerberus is expected to close during the third quarter of 2018.
© 2018 Private Equity Professional | April 27, 2018