KKR sells Capital Safety for $2.5bn, acquires C.H.I.

KKR realizes three times return on exit from Capital Safety

KKR is continuing to be active on the deal realisation and execution front with the firm's agreement to sell protective equipment manufacturer Capital Safety to Minnesota's 3M for $2.5 billion.

It has also struck an agreement to acquire C.H.I. Overhead Doors from San Francisco private equity firm FFL for undisclosed terms on Tuesday, according to statements by the New York private equity firm.

For KKR, the sale of Bloomington, Minnesota-based Capital Safety, a global company with 1,500 employees, after a three year hold period netted a three times return for its $17.6 billion KKR 2006 Fund, said a source familiar with the transaction.

3M's acquisition of Capital Safety from KKR commanded an enterprise value multiple of 14 times the target company's annual adjusted Ebitda. In addition, the deal included $700 million in debt, according to 3M.

Pete Stavros, member of KKR and head of the Industrials team, said in a statement: “3M is a perfect home for a company and team that is so deeply committed to safety.”

Morgan Stanley provided financial advice to 3M and Goldman Sachs served as financial advisor to KKR, which acquired Capital Safety for $1.1 billion in 2012.

Separately, KKR acquired C.H.I. from FFL after a four year hold period that provided an exit for FFL's $1.5 billion Fund III from the Arthur, Ill.-based maker of residential and commercial garage doors.

KKR tapped its in-house KKR Capital Markets and UBS Investment Bank for financing to support its acquisition.

“During our ownership period, C.H.I. experienced strong organic growth, about twice the rate of the market, nearly doubling EBITDA,” Greg Long, a managing director at FFL, told Private Equity International. “FFL is proud to have played a part in this through investments in new manufacturing capabilities, new warehouses, and in broadening its selling resources,” he added.

KKR's Stavros said the firm looks “forward to working together to continue building this outstanding franchise and making CHI's loyal and growing customer base of garage door dealers, distributors and installers even more successful.”

FFL's Long said the firm also helped C.H.I.'s management team improve its handling of material scrap, which resulted in significant cost savings for the company.

While he declined to discuss the return details of C.H.I.'s realiSation for FFL's third fund, Long said the firm was “pleased with the outcome of the sale.”

KKR relied on counsel from Kirkland & Ellis, whereas Barclays and Credit Suisse served as financial advisors to FFL and C.H.I., which relied on Willkie Farr & Gallagher for counsel.

On Monday, KKR announced it had  made two growth capital investments of $70 million each into semiconductor company Transphorm and Chinese educational services company Tarena International.