Kinderhook Industries has agreed to sell SCA Performance (SCA), an OEM authorized specialty vehicle manufacturer, to publicly traded Fox Factory for $328 million. Kinderhook acquired SCA in April 2018 in partnership with the founding McSweeney family.
SCA is a provider of vehicle upgrades for specialty light-duty trucks. The company’s upgrades include wheels, tires, bumpers, lighting, suspensions, fenders, badging, side steps, running boards, and exhaust systems. SCA receives new vehicles directly from original equipment manufacturers (including Chevrolet, Ford, GMC, Jeep, and Dodge), adds its specialty packages and then sells the up-fitted vehicles to new truck dealers with a full OEM warranty.
The company operates under three aftermarket brands – SCA Performance, Rocky Ridge Trucks, and Rocky Mountain Truckworks. Since its founding in 1979, SCA has produced over 120,000 custom vehicles. The company, led by CEO Michael McSweeney, is headquartered northeast of Birmingham in Trussville, Alabama with additional facilities in Fort Collins, Colorado (Rocky Mountain Truckworks which was acquired in March 2019) and Franklin Springs, Georgia (Rocky Ridge Trucks).
“This is an outstanding outcome for Kinderhook, SCA and its employees,” said Tom Tuttle, a managing director at Kinderhook. “The SCA team, led by Michael and Matt McSweeney, executed on an aggressive organic and acquisition-led growth strategy since Kinderhook acquired SCA in April 2018. We are very proud of the SCA team’s accomplishments and expect the company to continue its track record of success as part of Fox. Our investment in SCA highlights the key tenets of Kinderhook’s investment strategy – partnering with world-class management teams to create leading niche market companies.”
Fox’s buy of SCA is expected to close by the end of March 2020. According to Fox, for the balance of FY 2020 (nine months), SCA will have from $83 million to $89 million of revenue and $22 million to $24 million of adjusted EBITDA. Annualizing these nine-month projections results in revenues of $111 million to $119 million and adjusted EBITDA of $29 million to $32 million. Based on a purchase price of $341 million (including $13 million of post-closing performance-based contingent payments) the forward-looking adjusted EBITDA valuation multiple is from 10.6x to 11.7x.
Headquartered near San Jose in Scotts Valley, California, Fox Factory (NASDAQ: FOXF) designs and manufactures performance products primarily for bicycles, on-road and off-road vehicles and trucks, side-by-side vehicles, all-terrain vehicles, snowmobiles, specialty vehicles, and motorcycles. The company is a direct supplier to power vehicle OEMs, supplies bicycle OEMs and their contract manufacturers, and provides aftermarket products to retailers and distributors.
“We are excited to announce the acquisition of SCA, and believe it presents a substantial opportunity for Fox to further expand its performance-defining aftermarket solutions and continue to drive growth in our Powered Vehicles Group,” said Mike Dennison, Fox’s chief executive officer. “We look forward to further accelerating our already significant presence in the growing specialty vehicle manufacturing market. We welcome the experienced SCA leadership team and believe they will play an integral part in our company’s growth going forward.”
New York City-based Kinderhook makes control investments in companies with transaction values of $25 million to $150 million in which the firm can achieve financial, operational and growth improvements. The firm makes investments in non-core divisions of public companies, management buyouts of entrepreneurial-owned businesses, troubled situations, and existing small-capitalization companies lacking institutional support. Sectors of interest include healthcare services; environmental and business services; and automotive and light manufacturing.
Last month, Kinderhook held a final closing of its sixth fund, Kinderhook Capital Fund VI LP (along with a parallel fund, together “Fund VI”), at its hard cap with $1 billion of limited partner commitments. Fund VI was oversubscribed and is the largest fund ever raised by Kinderhook. Also last month, Kinderhook sold Stratus Video, a Florida-based provider of video, over-the-phone, and in-person interpretation services used in the healthcare industry, to publicly traded AMN Healthcare Services for $475 million, a purchase price equal to 14x adjusted EBITDA.
© 2020 Private Equity Professional | February 14, 2020