The recent acquisition of auto parts group Metaldyne by Japan's Asahi Tec does not signify a disaster for Metaldyne's financial sponsor, Heartland Industrial Partners. But the investment has not been pleasant.
Heartland, founded with much fanfare in 1999, was the brainchild of former US White House budget director David Stockman, who had also served stints as a US congressman and, more recently, as a senior managing director at Blackstone Group. Upon launching his firm, Stockman declared that, “traditional manufacturing businesses are undervalued and the industrial sector remains under-penetrated by private equity funds.”
In retrospect, US auto component businesses were at peak valuations and were about to fall off a cliff. For example, auto parts corporation Dana saw its stock trade at above $50 in 1999, but last month its shares were listed on the Pink Sheets at 23 cents.
One of Heartland's biggest deals was done in January 2001, when it combined three mid-sized automotive suppliers, MascoTech, Simpson Industries and Global Metal Technologies, into a single company called Metaldyne, based in Plymouth, Michigan. The three-way merger had a transaction value of roughly $2.6 billion. Credit Suisse owned roughly a quarter of the company. Heartland partner Tim Leuliette became president and CEO.
Along with the rest of the US auto parts industry, Heartland's fortunes went south from there. A separate portfolio company, Collins & Aikman, went bankrupt and last year was sold to distressed specialist WL Ross. Shortly thereafter, Stockman left Heartland.
In July, three former employees of Metaldyne were indicted on charges of stealing company manufacturing secrets and selling them to a Chinese rival.
Heartland's control of the company came to an end last month, when Metaldyne agreed to be acquired for $1.2 billion (€946 million) by the Japanese chassis and powertrain maker. A source close to the transaction says Heartland rolled its equity into the new company, but did so at an unspecified discount to its cost basis.
Asahi Tec is controlled by RHJ International, a Euronext-listed company comprised mostly of the Japanese holdings of Ripplewood Holdings, the New York-based buyout firm controlled by Tim Collins.
One partial salvation for Heartland may come in the form of TriMas, a maker of products for recreational vehicles. The company, a division bought out of Metaldyne in 2002, is preparing to go public and raise roughly $200 million.
APOLLO BUYS GE UNIT FOR $3.8BN
Apollo Management has agreed to buy GE Advanced Materials, the silicone and quartz materials producing unit of General Electric, for $3.8 billion (€3 billion) in cash and securities. GE will receive a ten percent ownership in the new company, which will be renamed, and hold $400 million of notes. The industrial unit, which is GE's second-largest, makes silicone-based products used for both consumer products and industrial processes. The unit also produces fused quartz and ceramics materials used in fiber optics and lighting, glass-making and welding. GE chairman and chief executive Jeff Immelt is known to have a deep interest in partnering with private equity firms. On several occasions, Immelt has hosted private dinners with the heads of several major private equity firms to discuss ways of working together, according to industry sources.
CASTLE HARLAN CREATES GLOBAL MALT PRODUCER
Castle Harlan and CHAMP Private Equity, its affiliate based in Sydney, Australia, have acquired four malting companies and merged them into a new global malting operation, United Malt Holdings. The two firms have jointly acquired US-based Great Western Malting, Canada Malting Company, Australia-based Barrett Burston Malting and a 60 percent interest in UK-based Bairds Malt. The businesses were acquired from US-based Conagra Foods and South Africa-based Tiger brands, which each owned half of the group operating under the name C&T Malt. The firms did not disclose how much they paid for the four companies. Together the four malting companies have revenues in excess of $400 million (€315 million).
FREESCALE GOES TO BLACKSTONELED GROUP FOR $17.6BN
In a deal valued at $17.6 billion (€13.9 billion), Texas semiconductor maker Freescale Semiconductor has decided to be taken private with a group including The Blackstone Group and including The Carlyle Group, Permira and Texas Pacific Group. The Austin, Texas semiconductor maker had been the subject of fierce competition between the Blackstone-led group and a rival group including Kohlberg Kravis Roberts, Bain Capital, Apax Partners, Silver Lake Partners and AlpInvest Partners, who reportedly wanted to merge Freescale with the semiconductor unit of Philips Electronics, an acquisition announced the previous month. Freescale, led by Michel Mayer, is a former division of Motorola, and is still the primary supplier of chips to the mobile phone maker.
THOMA CRESSEY TAKES EMBARCADERO PRIVATE
Thoma Cressey Equity Partners will buy Embarcadero Technologies, a company that produces data management software, for $234 million (€184 million). Embarcadero, which is traded on Nasdaq, was bought for $8.38 per share in cash, representing a 29 percent premium over the company's closing stock price. In June Embarcadero reported $98.6 million in assets, including $15 million in cash and cash equivalents. The company's revenue during the first six months of this year was $29.5 million, and net income was $2.3 million.
WARBURG PINCUS INVESTS $75M IN TRADING TECH COMPANY
Warburg Pincus is continuing its run of investments in financial technology companies with a $75 million (€58 million) investment in New York-based trading technology firm NYFIX. According to a source close to the transaction, Warburg will own about a 30 percent stake in NYFIX, but not ownership control – although Warburg will have its managing director, Cary Davis, and vice chairman, William Janeway, on the company's board of directors. Under the agreement, Warburg will buy 1.5 million shares of the company's convertible preferred stock. NYFIX plans to use the proceeds from the sale for business development activities and general corporate purposes.
HELLMAN, TPG LEAD $1.3BN TAKE-PRIVATE
Private equity firms Hellman & Friedman and Texas Pacific Group have agreed to lead the acquisition of Intergraph, a maker of spatial information management software, in a transaction valued at roughly $1.3 billion (€1 billion). Intergraph is currently traded on Nasdaq. Its share price has risen steadily for the past five years but took a tumble last January when it lost approximately 30 percent of its value. San Diego-based JMI Equity has also joined the deal. Intergraph software is used by energy, chemical and shipbuilding companies, among others. The products convert spatial information into visual representations.