New York-based KPS Capital Partners will sell Waupaca Foundry to Hitachi Metals for $1.3 billion in cash. KPS is expected to book a 5x cash-on-cash return on the deal. The transaction is expected to close in the fourth quarter of this year.
Sources familiar with the transaction say that Waupaca will distribute approximately $800 million in cash to stockholders on closing. This comes in addition to previous distributions of $325 million in 2013, and approximately $1.125 billion in total cash distributions over the two years of KPS’ ownership, totaling to nearly $900 million in profit.
Waupaca is the largest iron foundry company in the world, producing gray and ductile iron castings using state-of-the-art technology. The company is North America’s leading supplier of iron castings to the automotive, commercial vehicle, agriculture, construction and industrial markets.
KPS acquired Waupaca through a $226 million investment from its KPS Special Situations Fund III, a $2 billion private equity fund, in 2012. KPS acquired the company from ThyssenKrupp.
Over the course of KPS’ ownership, Waupaca increased EBITDA by 43%. “We think this is a great outcome for this company, and there is still international expansion potential through the partnership with Hitachi Metals,” David Shapiro, managing partner of KPS told Private Equity International. “This was a shorter than normal holding period for us, but we felt like the time was right versus holding the company for another two to five years.”
“The investment return generated for our investors in the Waupaca transaction is further validation of the KPS investment strategy,” Shapiro added.
The deal came as the result of an auction process led by Morgan Stanley.