(www.PrivateEquityCentral.net) Morgenthaler Partners, a US private equity firm based in Cleveland, Ohio, has acquired fineblanked components manufacturer MPI in a spinout from Klöckner Mercator Maschinenbau, a subsidiary of Klöckner Werke AG of Germany.
MPI, based in Rochester Hills, Michigan, had revenues of $135m in 2002, and employs 950 people in the US at its six manufacturing sites in Wisconsin, South Carolina, Indiana, and Ohio. The company’s products are used in the defense and aerospace, medical devices, construction machinery, and automotive industries.
The German parent group retained Merrill Lynch to auction off the division, which has been operating for the past 34 years. “Unfortunately, we couldn’t cut the process off, or we would have closed it a long time ago,” Morgenthaler general partner John Lutsi said. Morgenthaler had been the exclusive bidder since the start of December.
The terms of the transaction were not disclosed. Norwest Capital, a division of Wells Fargo that is providing subordinated debt financing to support the deal, is also committing some equity. Management currently has no stake in the company, but Lutsi said Morgenthaler would set aside a percentage of the company in a stock option plan for them to earn.
Fineblanking is a process whereby metal parts are stamped with the characteristics and tolerances of machined components parts through the use of special triple action presses.MPI president and chief executive officer Karl Pfister will continue to manage the 34-year old operation, and the core management group will remain intact. Two Morgenthaler partners, including Lutsi, will join MPI’s board of directors.
According to Lutsi, MPI is also an ideal platform to build a portfolio in the fineblanking sector. Morgenthaler is already anticipating making its first add-on acquisition at the end of March.
“We concluded about a year ago that a good investment opportunity would be to find a business that focuses on industry sectors that demand high precision components and, obviously, higher margins,” Lutsi said.Founded in 1968, Morgenthaler maintains two investment arms: a middle-market, management buyout group based in Cleveland, and a venture-capital group based in Menlo Park, California.
The firm closed its latest fund, Morgenthaler VII, on $850m raised in July 2001, bringing total capital under management to $2bn. The MPI investment was made via Fund VI, which is approximately 75 per cent committed.
Morgenthaler’s buyout group focuses on management buyouts and leveraged recapitalizations of stand-alone middle-market companies, as well as divisions or subsidiaries of larger corporations. Morgenthaler concentrates on investments in the manufacturing, business services, communications, and healthcare sectors. In July, the firm acquired UAV Corp., a national distributor of less-expensive DVD, CD and VHS products to retail outlets.