Littlejohn Carves Out Kaman Distribution

Publicly traded Kaman Corporation has agreed to sell its distribution (Kaman Distribution) segment to Littlejohn for $700 million in cash.

Kaman Distribution is a distributor of more than six million items including electro-mechanical, bearings, power transmission, motion control and electrical and fluid power components, as well as automation and MRO supplies, to customers in a wide range of industries.

The business also provides engineering, design and support for automation, electrical, hydraulic and pneumatic systems; belting and rubber fabrication; hose assemblies; and repair and fluid analysis services. Kaman Distribution has 2,200 employees and 220 locations across the US and Puerto Rico.

In 2018, Kaman Distribution had total revenues of $1.1 billion and $66.3 million of adjusted EBITDA. For the twelve months ending March 2019, adjusted EBITDA was $67.6 million resulting in a valuation multiple for this transaction of 10.4x.

“Kaman Distribution builds upon Littlejohn’s deep expertise investing in the distribution and industrial sectors,” said Tony Miranda, a managing director of Littlejohn. “We have long admired Kaman Distribution, a market-leading provider of products and solutions to its customers as well as a trusted partner to its suppliers and look forward to working closely with management to further invest in the business and drive growth, both organically and via acquisition.”

In addition to its distribution business, Kaman (NYSE: KAMN) also produces aircraft bearings, components, and composite aerostructures for commercial, military and general aviation fixed and rotary wing aircraft; arming systems for missiles and bombs; manufactures the K-MAX manned and unmanned helicopters; and provides maintenance and modifications services to its line of Super Seasprite maritime helicopters. Kaman’s aerospace business operates out of fourteen facilities with almost 3,000 employees and is expected to have revenues of $730 million in 2019. Kaman was founded in 1945 by Charles Kaman and is headquartered in Bloomfield, CT (www.kaman.com).

Littlejohn makes control and non-control investments in middle-market companies that are undergoing a fundamental change in capital structure, strategy, operations or growth.  The firm invests from $50 million to $150 million of equity in middle-market companies that have annual revenues of $100 million to $800 million.  Littlejohn invests across a range of industries and acquires manufacturers, distributors, and service providers. The firm is headquartered in Greenwich, CT (www.littlejohnllc.com).

Kaman expects to receive approximately $600 million in net proceeds from this transaction and will use the cash to pay down $100 million of debt, return capital to shareholders through dividends and share repurchases, and to fund acquisitions in the engineered product end markets.

“For Kaman this transaction represents an important milestone in our portfolio transformation and the culmination of a thorough strategic review undertaken by our board of directors,” said Neal Keating, chairman, president and CEO of Kaman. “Our strengthened balance sheet will better position the company to invest in and build our higher margin, higher growth aerospace and engineered products businesses to enhance shareholder value.”

Debt financing commitments in support of the acquisition have been provided by Jefferies, Antares Capital, and Bank of Montreal.

Robert W. Baird & Co. and J.P. Morgan Securities are the financial advisors to Kaman.

This transaction is expected to close in the third quarter of 2019.

© 2019 Private Equity Professional | June 26, 2019

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