Archives for November 2020

Arlington Closes Sale of Centauri at Big Multiple

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Arlington Capital Partners (ACP) has closed its previously announced sale of Centauri to publicly traded KBR for $800 million in cash.

Centauri is a provider of engineering, intelligence, cybersecurity and advanced technology to intelligence and national defense agencies for applications on land, air, sea, space, and cyberspace. The company specializes in outer space and directed energy applications.

Centauri was formed by ACP in April 2019 to consolidate its national security investments in Integrity Applications (acquired in February 2018), Dependable Global Solutions (acquired in July 2018), and Xebec Global (acquired in October 2017).

Centauri, led by CEO David Dzaran and headquartered in Chantilly, Virginia, has just more than 1,750 employees and 22 offices across in Virginia, California, Hawaii, Ohio, Michigan, Pennsylvania, Massachusetts, and Maryland.

“Arlington’s bold vision for Centauri’s future is what led us to partner with them, and it is fulfilling to have seen that strategy realized,” said Mr. Dzaran. “Our partnership with Arlington has produced outstanding growth for Centauri and we are equally as excited for the next chapter with KBR, where our combined capabilities will allow us to advance our solutions to the next level.”

KBR (formerly Kellogg Brown & Root) is an engineering, procurement, and construction company and a former subsidiary of Halliburton (it was spun out as a public company in 2006). The company provides professional services and technologies to the government, defense, space, aviation, energy, and specialty chemicals sectors. KBR has performed under numerous contracts with the US military during World War II, the Vietnam War, and the Iraq War. KBR, led by CEO Stuart Bradie, was founded in 1901 and is headquartered in Houston.

KBR has announced that it expects Centauri to have 2021 revenues of more than $700 million and EBITDA of more than $70 million. This yields an 11.4x proforma EBITDA valuation multiple.

“During our partnership, Centauri achieved dramatic growth and, through unique subject matter expertise along with aggressive investments in technology, solidified its role as a strategic asset to the national security community,” said David Wodlinger, a partner at Arlington Capital. “Centauri was purpose-built to solve the most complicated space and directed energy challenges faced by our country, a strategy that will only be enhanced by KBR’s scale, strong management team and shared focus on quality and culture.”

“Centauri’s world-renowned technical talent, specialized mission expertise and advanced R&D labs are a powerful combination that underlies its enduring market advantage,” said Ben Ramundo, a vice president at Arlington Capital. “With continued investment behind those strengths as a result of joining KBR, Centauri’s brightest days are still ahead.”

Arlington Capital was founded in 1999 and has completed over 90 acquisitions since its inception. Areas of interest include government-regulated industries and adjacent markets including aerospace & defense; government services; and technology, healthcare, and business services. Arlington Capital, based in Chevy Chase, Maryland, is currently investing out of Arlington Capital Partners V LP, a $1.7 billion fund that closed in June 2019.

Jefferies was the financial advisor to Centauri and Citizens Capital Markets advised KBR.

© 2020 Private Equity Professional | November 4, 2020

Where’s the Beef? Just Ask Altamont and Palladium

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Colorado Boxed Beef, a portfolio company of Altamont Capital Partners, has merged with Quirch Foods, a portfolio company of Palladium Equity Partners. Altamont first invested in Colorado Boxed Beef in 2017 and will retain an equity stake in the combined business.

Colorado Boxed Beef (CBB), with annual revenues of more than $1.8 billion, is the second-largest specialty distributor of protein products – beef, pork, poultry, and seafood – in the United States. Customers of the company include independent and chain retailers, cruise lines, foodservice distributors, and amusement parks.

Colorado Boxed Beef, founded in 1975, is headquartered east of Tampa in Lakeland, Florida and has more than 1.4 million square feet of distribution space with facilities in Florida, Georgia, Oregon, Pennsylvania, Texas, and Washington. Company-owned brands include High River Angus, Diamond Reef Seafood, and The Great Fish Co. Altamont acquired Colorado Boxed Beef in June 2017 and closed three add-on acquisitions during its ownership term.

Quirch Foods is a distributor of packaged foods, frozen foods, poultry, pork, seafood, beef, and deli items to independent and chain supermarkets, foodservice distributors, processors and manufacturers, cruise lines, and restaurants across the United States, the Caribbean, and Central and South America.

As a result of the merger, Quirch now has more than 450 refrigerated trucks and over 2.2 million square feet of combined distribution space through 21 facilities in Florida, Georgia, North Carolina, Tennessee, Alabama, Illinois, Texas, Washington, Oregon, and Puerto Rico. The company, led by CEO Frank Grande, was founded in 1967 by Guillermo Quirch Sr. and his two sons, Eduardo and Guillermo Jr., and is headquartered near Miami in Coral Gables, Florida.

As part of the merger transaction, Mr. Grande will lead the combined company with John Rattigan Jr., the CEO of Colorado Boxed Beef, assuming the title of Chief Growth, Strategy, and M&A Officer. Quirch now has more than 20 distribution centers nationwide, approximately 1,700 employees, and in excess of $3 billion in annual sales.

“Altamont’s partnership has been instrumental in our success over the past few years,” said Mr. Rattigan. “We look forward to continuing this momentum and believe that this merger is an excellent outcome for both companies. Quirch Foods, backed by Palladium, is committed to creating the leading protein portfolio in the industry and we are excited to be part of this growth. Our leadership team remains in place and we will continue to offer our combined customers exceptional service while enhancing our product offering.”

The buy of Colorado Boxed Beef is the second add-on acquisition completed by Quirch since being acquired by Palladium in December 2018. Last May, Quirch closed its first add-on with the buy of family-owned Butts Foods, a Tennessee-based full-service protein distributor serving national and independent grocery stores and regional distributors in the Southeast and Midwest. The company’s products include more than 2,000 SKUs of poultry, beef, pork, fish, turkey, vegetables, smoked meats, cheese, oils and condiments, and paper towels.

“We are pleased to support Quirch’s enhancement of its platform through this transaction with Colorado Boxed Beef, which has brought together a family of highly regarded operating companies that pride themselves on service, expertise in protein distribution, and in helping customers grow their businesses,” said Chris Allen, a partner of Palladium. “The combination with Colorado Boxed Beef, following that of Butts Foods earlier in the year, is in line with our strategy as the management team continues to build the company into a leading distributor and exporter of protein and ethnic food products in the US.”

“CBB has consistently built on its long history of providing great products and service to its valued customers,” said Randall Eason, a managing director at Altamont. “We are proud of what we have accomplished together over the course of our partnership and are confident that CBB is well-positioned for continued success as the company enters this next chapter of growth.”

Altamont invests equity of $15 million to $100 million in companies that have up to $50 million of EBITDA. Sectors of interest include business services, healthcare, consumer and retail, industrials, and financial services. The firm was formed in 2010 by Mr. Eason, Jesse Rogers, and Keoni Schwartz who previously worked together at Golden Gate Capital and Bain & Company. The firm has $2.5 billion of capital under management and is based in Palo Alto, California.

New York City-based Palladium invests from $50 million to $150 million of equity in companies that have $10 million to $75 million of EBITDA.  Sectors of interest include consumer, services, industrials and healthcare, and Palladium specializes in investing in companies that operate in the US Hispanic market.

© 2020 Private Equity Professional | November 2, 2020

Auxo Buys PPG from Long Point and Greyrock

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Auxo Investment Partners has acquired sister companies Paramount Tube and Euclid Medical. The two companies both operate under the Precision Products Group (PPG) brand name.

Paramount Tube is a manufacturer of small diameter paper and plastic tubes used in a variety of niche applications requiring tight tolerances, unique materials, performance attributes, or difficult to produce shapes. The company’s products are used as components in electric motors, transformers, fuses, pharmaceutical and consumer packaging, and military ordinance.  Paramount Tube is headquartered in Fort Wayne, Indiana.

Euclid Medical designs and manufactures automated single- and multi-dose pharmaceutical packaging and barcoding systems used in hospitals, retail pharmacies, and long-term care facilities. Euclid Medical is headquartered 35 miles southwest of Akron in Apple Creek, Ohio.

“We selected Auxo as our partner because of their desire to support our vision for growth and the values our organizations share,” said Dave Hooe, the CEO of PPG, who will continue in this role under Auxo ownership. “We think Auxo’s hands-on investment approach will bolster our ability to aggressively pursue our growth plan and ensure a prosperous future for our company and for our long-standing employees.”

The buy of PPG is Auxo’s seventh acquisition for its inaugural fund, Auxo Growth Holdings I, which closed in the fall of 2018.

“We were immediately impressed with PPG’s unique capabilities and dominant market position,” said Jeff Helminski, a managing partner of Auxo. “It’s clear the company’s values are closely aligned with ours — and its success has been driven by the leadership team’s unrelenting pursuit of excellence and customer service. We’re excited to work with Dave and his team to honor the legacy they have built and support them in leveraging their unique capabilities to expand their global footprint both organically and acquisitively.”

Paramount Tube was founded in 1927 and was acquired by packaging maker J.L. Clark in 1986 as part of its Precision Products Group (PPG) which also included Stone Industrial, Michigan Spring & Stamping, and Timms Spring. In 1992, PPG was acquired by LaSalle Capital and in 2008, two parts of the group – Michigan Spring & Stamping, and Timms Spring – were sold to Hines Corporation. In 2013, PPG was acquired by Long Point Capital and Greyrock Capital. Euclid Medical was founded in 1956 as Euclid Spiral Paper Tube Corporation and was acquired by PPG in 2015.

Auxo invests in North America-based companies that have from $1.5 million to $15 million of EBITDA. Sectors of interest include manufacturing, industrial, value-added distribution and business services. Typical investments for Auxo occur at corporate transition points, including owner-operators planning retirement, companies exploring family succession, and ownership/management teams seeking growth capital. The firm prefers majority-control investments but will consider select minority opportunities.

“We couldn’t be more thrilled to be working with the PPG team,” added Jack Kolodny, a managing partner of Auxo. “This is exactly the kind of company we had in mind when we formed Auxo — and we look forward to being an active and additive partner in the continued growth of an already outstanding company.”

Auxo was founded in October 2016 and is led by its managing partners Mr. Helminski, Mr. Kolodny and Fred Tedori. The firm, which is named after the ancient Greek goddess of growth, has offices in Grand Rapids, Michigan and Los Angeles, California.

Brown Gibbons Lang & Company (BGL) was the financial advisor to PPG on this transaction. “BGL’s team demonstrated a thorough understanding of both the industrial and healthcare-related aspects of our business,” said Mr. Hooe. “The BGL team was committed to driving the process at every stage of the transaction and identified a partner that shares the vision of the management team and will support our growth strategy.” Managing Director Andrew Petryk led the transaction for BGL.

As part of the sale of PPG to Auxo, Greyrock has re-invested in the company through an $8.5 million subordinated debt and equity investment. In September 2020, Greyrock held a final closing of its fifth fund, GCG Investors V LP, with $280 million of capital. Greyrock’s earlier investment in PPG was though its third fund.

Greyrock Capital provides from $5 million to $35 million of subordinated debt and equity to lower middle-market companies that have revenues of at least $10 million and EBITDA of at least $3 million. Greyrock has offices in Walnut Creek, California; Chicago, Illinois; Wilton, Connecticut; and Naples, Florida.

Long Point Capital invests from $10 million to $50 million of equity in manufacturing, distribution, and service companies with at least $5 million of EBITDA and enterprise values of $20 million to $200 million. The firm has offices near Detroit in Royal Oak, Michigan and New York City.

© 2020 Private Equity Professional | November 2, 2020

Tree Line Backs Longshore’s Gen3

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Lower middle-market lender Tree Line Capital Partners has backed Longshore Capital Partners’ acquisition of Gen3 Marketing from LaSalle Capital.

Gen3 is a provider of digital marketing services, including pay-per-click, search engine optimization, and social media. The company was founded in 2007 and is headquartered near Philadelphia in Blue Bell, Pennsylvania.

Longshore was formed in 2020 by LaSalle Capital professionals Ryan Anthony and Nicholas Christopher and closed its debut fund, Longshore Capital Fund I LP, with capital commitments of $203 million last August. In tandem with the closing of the new fund, Longshore acquired a controlling interest in Gen3 Marketing and four other business services companies from LaSalle (LaSalle acquired Gen3 in December 2017).

Tree Line provided a first lien credit facility to support Longshore’s buy of Gen3. “We have enjoyed building a lasting relationship with the Tree Line team and chose to work with Tree Line given the certainty to close they provided through an uncertain COVID-19 deal environment,” said Mr. Anthony. “Gen3 was one of the first platform investments in our inaugural Longshore fund and certainty to close was paramount. Tree Line moved quickly and spoke with confidence.”

“This transaction is a great example of our relationship-driven approach to direct lending,” said Stephan Schneck, a senior vice president of Tree Line. “Having completed past transactions with the Longshore team, we were able to leverage existing documentation and streamline the closing process. We recognize the value generated from buy and build strategies and are well equipped to execute these deals over a long relationship given our significant follow-on capital capacity.”

Tree Line provides first lien term loans, unitranche term loans, and equity co-investments to North America-based lower middle market companies that have EBITDA from $3 million to $30 million and transaction sizes up to $150 million. The firm has extensive direct lending experience – it has completed more than 110 transactions – across multiple economic cycles and has generated significant repeat investment opportunities from private equity sponsors. Tree Line is headquartered in San Francisco with additional offices in New York City, Los Angeles, and Austin.

Chicago-headquartered Longshore makes control investments in North America-based companies with $5 million to $15 million of EBITDA. Sectors of interest include business process outsourcing, revenue cycle management, and managed services and payments.

© 2020 Private Equity Professional | November 2, 2020

CenterGate Closes Mid-State Add-On

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Publicly traded AZZ has sold AZZ SMS to Mid-State Industrial Maintenance, a portfolio company of CenterGate Capital.

SMS is a provider of boiler repair, maintenance, and overhaul services. The business has approximately$35 million in annual revenue and operates a 26,155 square foot facility in St. Petersburg, Florida.

Mid-State, acquired by CenterGate Capital in February 2019, provides industrial services to customers in the chemical processing, phosphate mining, power generation, and building products industries throughout the southeastern United States.

The company currently employs more than 500 engineers and shop personnel that are active in manufacturing, repairing, designing, dissembling and transporting equipment and machinery ranging from gearboxes and trommels to structural piping and storage tanks. Mid-State, led by CEO Jeff Clyne, was founded in 1973 and is headquartered in Lakeland, Florida.

“We believe the acquisition of SMS contributes towards our vision of providing our customers with the best services with a focus on safety and quality that we know they depend on,” said Mr. Clyne. “Acquiring SMS further positions us as a leader in diversified industrial solutions.”

AZZ (NYSE: AZZ) manufactures electrical equipment and components used in power generation, power transmission and power distribution applications. The Fort Worth, Texas-based company also provides hot dip galvanizing services to the steel fabrication industry.

SMS was acquired by AZZ in 2013 as part of its acquisition of Georgia-based Aquilex Specialty Repair and Overhaul, a portfolio company of Centerbridge Partners.

“The divesture of SMS is in line with our strategic plan to restructure our portfolio to focus on growth within our core businesses,” said Tom Ferguson, CEO of AZZ. “We are pleased to have reached an agreement with Mid-State to acquire SMS while maintaining uninterrupted service to the customers of SMS, and employment for the SMS workforce. We are focused on activities that will drive higher returns on invested capital within our core businesses for long-term margin expansion and growth.”

Austin, Texas-based CenterGate invests in lower middle-market companies that have from $20 million to $250 million of revenue and up to $20 million of EBITDA. Sectors of interest include business services, industrials, energy services, consumer, and healthcare. In December 2016, the firm held an above target and oversubscribed final closing of CenterGate Capital Partners I LP with $350 million of capital commitments.

© 2020 Private Equity Professional | November 2, 2020