Stellex Capital Management has partnered with a group of automotive industry veterans to acquire publicly-traded Fenix Parts.
Fenix Parts is active in the recovery and resale of OEM parts, components, and systems reclaimed from damaged, totaled, or low-value vehicles. Customers of the company include collision repair shops (body shops), mechanical repair shops, auto dealerships and individual retail customers. Fenix operates from 16 locations throughout the eastern US and in the province of Ontario in Canada. The company was founded in 2014 and is headquartered near Chicago in Westchester, IL (www.fenixparts.com).
The purchase price for Fenix was approximately $48 million which includes the assumption of $40 million in debt. “We are pleased to announce this transaction with Stellex following a long and exhaustive strategic review process, which included multiple offers from both strategic and financial entities that ultimately fell apart,” said Kent Robertson, CEO of Fenix. “Throughout this process, the company’s financial condition has continued to deteriorate due to ongoing liquidity constraints which limited the company’s car buying activity and the impact of a fire in April 2017 at our Toronto facility. As a result of continued negative cash flow from operations and the current liquidity situation, including the continuing default on our senior secured credit facility, there was significant doubt that the company could remain a going concern, limiting our options to move forward with the business.”
Bill Stevens, an executive with more than 25 years of experience in the auto recycling industry, will serve as the new CEO of Fenix. Joining Mr. Stevens are Paul Delaney, who will serve as COO, and Stoney Rutledge, who will serve as Vice President of Purchasing and Procurement.
“We are thrilled to be investing in this space and to have the opportunity to work with such an experienced operating team,” said Michael Stewart, a Managing Partner at Stellex. “This is a great fit for us given our extensive experience investing across the automotive supply chain.”
Messrs. Stevens, Delaney and Rutledge are former executives of GreenLeaf Auto Recyclers which was spun out of the Ford Motor Company in 2003. Ford created GreenLeaf in 1999 to sell recycled parts to repair shops. The company bought about 30 junkyards in North America and at one time targeted creating a $1-billion-a-year auto recycling business. In 2005, GreenLeaf was acquired by Schnitzer Steel and in 2009 the business was sold to publicly-traded LKQ, the sector’s market share leader.
According to the American Recycling Association, the automotive recycling industry is highly fragmented with few multi-facility operators. There are an estimated 9,000 vehicle recycling facilities in the United States and Canada with the majority of companies having between $1 million and $10 million of revenue. “Fenix intends to work with independent operators and industry alliances while pursuing initiatives to allow the company to grow both organically and inorganically,” said Mr. Stevens.
Stellex invests from $25 million to $100 million per transaction in companies experiencing some form of financial, operational or industry-driven distress. Target companies will typically have an enterprise value of $50 million to $500 million and will be located in the United States or Europe. Sectors of interest include automotive, aerospace, building products, defense, industrial equipment, metal fabrication and transportation. Stellex has offices in New York and London (www.stellexcapital.com).
In July 2017, Stellex closed its debut fund, Stellex Capital Partners LP, at $870 million, exceeding its $750 million target.
© 2018 Private Equity Professional | April 20, 2018