KPS Closes Third Sale from IES, Hits 3X Return

Angeles Equity Partners has acquired Crenlo from International Equipment Solutions, a portfolio company of KPS Capital Partners.

KPS formed International Equipment Solutions (IES) in September 2011 to acquire Paladin Brands and Crenlo from publicly traded Dover Corporation. In March 2019, KPS sold IES’ Paladin and Pengo units to Stanley Black & Decker (NYSE: SWK) and then in May 2019, it sold IES’ Genesis Attachments unit to NPK Construction Equipment. After these transactions the only remaining operating unit of IES was Crenlo.

Crenlo is a manufacturer of steel frame cab enclosures and rollover structures used by OEM’s in the construction, agriculture, and commercial equipment markets.

Crenlo’s Emcor division provides electronic equipment cabinets – including server cabinets, enclosures, and consoles – that protect electronic equipment in the technology, aerospace, government and energy markets. The company, led by President John Duncan, has two facilities (one in Brazil) with more than 600,000 combined square feet and is headquartered in Rochester, MN. The company’s Brazilian operation was acquired in June 2012 with the buy of Siac do Brasil.

The sale of IES in three transactions resulted in a return to KPS, according to a source familiar with the transaction, of 3x its equity investment. Crenlo was the final investment held by KPS’s third fund.

“We congratulate and thank the Crenlo management team for their impressive execution,” said Raquel Palmer, a managing partner of KPS. “We are proud to have partnered with IES’ CEO Steve Andrews and CFO Steve Klyn in Crenlo’s incredible transformation from a non-core division of a large corporation into a highly profitable and thriving standalone company.”

Simultaneous with the buy of Crenlo, Angeles Equity acquired Worthington Industries Engineered Cabs from publicly traded Worthington Industries. The combined business will be majority-owned and controlled by Angeles Equity, with Worthington Industries retaining a minority equity position.

Worthington Industries Engineered Cabs (WIEC) designs and manufactures open and enclosed cabs used in a range of heavy mobile equipment in the agriculture, construction, mining, military, material handling, and forestry end markets. WIEC also produces crates, steel pallets, and racks used for shipping heavy mobile equipment. The business has manufacturing facilities in Watertown, SD, and Greeneville, TN.

“Crenlo and WIEC are recognized independent providers of engineered operator cabs in North and South America for many of the world’s heavy equipment and off-highway vehicle manufacturers,” said Timothy Meyer and Jordan Katz, co-founders and managing partners of Angeles Equity in a released statement. “This transformational merger will create a business with remarkable capabilities and scale. We believe this is a compelling opportunity to leverage our firm’s capabilities to help the new company achieve its full potential.”

“Angeles Equity Partners’ significant operating experience and value creation capabilities make them the right partner to integrate, strategically position and transform the new company for success,” said John Duncan, the president of Crenlo.

Angeles Equity makes control investments in companies with enterprise values up to $200 million that have headquarters and primary operations in the United States and Canada. Sectors of interest include aerospace, automotive, building products, capital goods, chemicals, electronics, manufacturing, metals, transportation & logistics, packaging and distribution. In January 2017, the firm closed Angeles Equity Partners I LP with $360 million in capital. The firm is headquartered in Los Angeles.

“Angeles is excited to partner with John Duncan and the Crenlo management team on the integration and transformation of these businesses,” said Frank Spelman, a managing director at Angeles Equity. “We expect customers will see positive near-term changes resulting from this merger as we leverage the best of both organizations to offer customers exceptional value, quality, and reliability.”

KPS Capital Partners makes control investments in manufacturing and industrial companies across a range of industries, including basic materials, branded consumer, healthcare, automotive parts, capital equipment, and general manufacturing. Many of KPS’s investments involve creating new companies to buy underperforming or distressed assets, companies operating in bankruptcy or in default of obligations to creditors, or with a history of recurring operating losses.  In addition to its New York headquarters, KPS has offices in Frankfurt and Amsterdam.

In October, after just four weeks of fundraising, KPS held a first, final, hard cap and oversubscribed closing of KPS Special Situations Fund V LP and KPS Mid-Cap Fund LP. KPS Fund V had a $5 billion target and a $6 billion hard cap, and KPS Mid-Cap had a $750 million target and a $1 billion hard cap.

Columbus, OH-based Worthington Industries (NYSE: WOR) is a diversified metals manufacturing company with annual revenues of more than $3.5 billion. The company has 70 facilities in 7 countries and more than 10,000 employees.

Lincoln International was the financial advisor to Crenlo and KPS, and Cowen was the financial advisor to Worthington.

© 2019 Private Equity Professional | November 5, 2019

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