PRIVATE TO PUBLIC TO PRIVATE

Talk about long-term care – last month, New York private equity firm Welsh Carson Anderson & Stowe, in partner ship with Chicago's Thoma Cressey Equity Partners, agreed to buy Select Medical, a hospital company the two firms have been involved with since 1997.

Publicly traded Select Medical agreed to merge with an entity backed by Welsh Carson and Thoma Cressey in a deal worth $2.3 billion (€1.84 billion). The company, in fact, was taken public by the two firms in 2001.

The story begins with the firm formerly known as Golder, Thoma, Cressey, Rauner (the name was later changed to Thoma Cressey after Bruce Rauner left to form GTCR Golder Rauner) which had a longstanding and highly successful relationship with Rocco and Robert Ortenzio, a fatherson team that excel at founding and selling healthcare companies with the backing of private equity firms. When Select Medical went public on the New York Stock Exchange, it was the fourth time that the Ortenzios had enjoyed an IPO.

Mechanicsburg, Pennsylvania-based Select Medical was formed in 1997 with a $56 million equity commitment from the two private equity firms and the Ortenzios. Immediately the company began a spree of acquisitions, buying 13 companies in 12 months.

After its IPO, Select Medical stock trended downward until the middle of last year, when it quickly doubled in price. Around this time, Welsh Carson liquidated the remainder of its holdings in Select Medical.

Now it's time for round two – the company is to go private again with Rocco and Robert as major equity participants. Private equity firms that experience success with a management team typically seek to partner with the same people again and again. The Ortenzios would be an extreme example of this. Rocco, now 71, said in a 1998 interview with Knight-Ridder news service on the occasion of Select Medical's IPO: “I gave [retirement] a real shot about a year and a half ago, and it just didn't work”.

LEVI STRAUSS CANCELS DOCKERS SALE TO VESTAR
Jeans-maker Levi Strauss has called off the $800 million (€635 million) proposed sale of its Dockers casualpants business to New York's Vestar Capital Partners after signing a letter of intent several weeks ago. The Dockers line, which produces approximately $1.4 billion in annual revenues, has seen a drop in sales of nearly 20 percent this year. Levi Strauss was reportedly looking for a $1 billion valuation on Dockers and promised to halt the auction if its price was not matched. Many industry observers had pegged the price at a more realistic $650 million. Vestar's last purchase was back in January, when the firm's Parisian office bought 75 percent of the French operations of Houston-based funeral and cemetery operator SCI. In other recent news, Vestar agreed to sell Sheridan Healthcare in a management buyout led by Boston-based JW Childs Associates; and also agreed to sell Sab Wabco, a Swedish brake systems maker for railways, in a deal valued at €310 million ($381 million).

LEHMAN BROS SEES SOARING AIRPLANE EXIT
The merchant banking arm of Lehman Brothers, along with private investor Bernard Schwartz, will realize huge gains upon the completion of their agreement to sell aircraft parts maker K&F Industries to Los ([A-z]+)-based Aurora Capital Group for $1.06 billion (€850 million) in cash. Lehman Brothers Merchant Banking has invested a reported $83.8 million in the company since 1998. Schwartz is the chairman and CEO of Loral Space & Communications, which filed Chapter 11 bankruptcy recently. K&F makes aircraft wheels, brakes, anti-skid systems, fuel tanks, ice guards and oil booms, according to a press release.

LEONARD GREEN WRANGLES LOWER PRICE ON VIDEO RENTER
Leonard Green & Partners, the Los Angeles-based private equity group has agreed to revised terms with Hollywood Entertainment on the purchase of the publicly traded US video rental chain. The new valuation is $620 million (€489 million), or $10.25 a share. The agreement is the latest development in negotiations between the two parties which earlier this year produced a public-to-private proposal valuing Oregon-based Hollywood at $888 million, or $14 a share. An agreement to that effect was signed in March. But in August, Leonard Green withdrew the offer, citing a belief that the financing condition to the completion of the deal would not be met. Hollywood's Nasdaq-listed shares dropped nearly 30 percent as a result. Hollywood is the second-largest video rental business in the US. Market leader Blockbuster is also experiencing difficulties and in July reduced earnings projections by 30 percent.

BEHRMAN ACQUIRES CHEMICAL RESEARCH LAB
New York- and San Francisco-based Behrman Capital has acquired WIL Research Laboratories from Great Lakes Chemical in a $105 million (€85 million) deal. WIL, based in Ashland, Ohio, provides non-clinical toxicological testing and bioanalytical contract services to the pharmaceutical, chemical and biotechnology sectors. The unit was originally purchased by Great Lakes in 1978. The divestment was based on Great Lakes' desire to focus on its core industrial and consumer businesses. Back in January, the firm acquired Hunter Defense Technologies, a maker of military and homeland defense products, for $90 million

ARLINGTON CAPITAL BUYS ENVIRONMENTAL CONSULTANT
The Washington, DC private equity firm has acquired SECOR International, one of the largest consulting services to cater to the petroleum sector. The Redmond, Washington business, which has expected revenues of $125 million (€99 million), provides “remediation” management, consulting, compliance and permitting services to the petroleum, chemical, industrial, pulp and paper, and power industries. This recent deal represents Arlington Capital's eighth acquisition over the past 18 months. In January, the firm bought Science & Engineering Associates, based in New Orleans, in a transaction valued at approximately $100 million (€79 million). SEA has since 1980 been the lead contractor for the US Navy's Space and naval Warfare Information Technology Center.

INVESTCORP BUYS MAGAZINES FOR $350M
The global private investment firm has agreed to buy Thomson Media from The Thomson Corporation, giving Investcorp control of a collection of business publications. Thomson Media, with titles including American Banker, The Bond Buyer, National Mortgage News, and Investment Dealers' Digest, had been on the block for some time. In 2003, the unit had revenues of $170 million (€134 million). Jim Malkin will remain chief executive officer of Thomson Media. Investcorp has had some success with publishing businesses – last year with partner MidOcean Partners, it sold yearbook company Jostens to DLJ Merchant Banking for $1.2 billion. Investcorp had originally purchased the company in 1999 for $826 million.