KPS Carves Out IKG from Harsco

KPS Capital Partners has agreed to acquire the IKG business of publicly traded Harsco Corporation for $85 million composed of $40 million in cash and a $40 million seller note. KPS is acquiring IKG through is KPS Special Situations Mid-Cap Fund which closed in October 2019.

Houston-based IKG is a manufacturer of steel and aluminum bar grating and fencing products that are used primarily in industrial flooring, safety and security applications across a range of industries. IKG, led by CEO Chad McClendon, has 350 employees and five manufacturing facilities in the US (Nevada, Indiana, Oklahoma, Alabama, and Texas) and one Mexico.

The history of IKG and Harsco begins in 1966 when Harsco acquired the Irving Subway Grating Co., the first commercial steel grating company and the supplier of steel grating that was used to ventilate the New York City subway system. Also in 1966, Harsco acquired two other grating makers – Kerrigan Iron Works and Gary Grating – and merged all three to form IKG. In 1986, Harsco acquired Easco Corp. and Borden Metal Products and merged these companies into IKG.

“We thank Harsco for their constructive approach on this transaction and look forward to working with Chad McClendon, and IKG’s management team and employees to build on this great platform,” said Ryan Harrison, a partner of KPS. “Given IKG’s demonstrated strengths, the addition of KPS’ strategic, operational and financial resources will create an ideal foundation for IKG’s future success as an independent company.  We intend to drive the company’s growth both organically and through strategic acquisitions.”

Last year, Harsco announced that it intended to divest itself of its industrial segment (comprised of IKG; Patterson-Kelley, a maker of commercial boilers and water heaters; and Air-X-Changers, a maker of industrial air coolers). With the sale of IKG, all three businesses have now been sold for a total of $745 million.

Harsco (NYSE: HSC) provides industrial services and engineered products to companies operating in the steel, railways, and energy sectors. The company has more than 11,000 employees and is headquartered near Harrisburg in Camp Hill, Pennsylvania.

“The sale of our IKG business is yet another noteworthy transaction for our business as we continue to transform into a single-thesis environmental solutions company,” said Harsco chairman and CEO Nick Grasberger. “As with our other industrial business transactions, the sale of IKG will further enable Harsco to focus on high growth, less cyclical areas with a strengthened balance sheet and increased financial flexibility. I am confident that under KPS’ ownership, IKG will become part of a firm that has extensive experience owning and operating metals-related businesses, and one that is committed to its growth.”

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 October 2019, 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. The KPS Mid-Cap funds, led by Partners Pierre de Villeméjane and Ryan Harrison, invests in the lower end of the middle market in companies that require up to $100 million of initial equity capital.  KPS is headquartered in New York City with additional offices in Frankfurt and Amsterdam.

RBC Capital Markets is the financial advisor to Harsco and the closing of this transaction is expected in early 2020.

© 2020 Private Equity Professional | January 16, 2020

Print Friendly, PDF & Email