New York-based Wellspring Capital Management has agreed to sell ACMI Holdings to Coinstar for $235 million (€196 million), netting the firm almost six times return on its equity invested.
ACMI produces and operates amusement vending machines, the majority of which are ‘skill-crane’ machines that dispense stuffed animals, watches, jewelry and other novelties, with the rest of the equipment comprised of video games, children’s rides and gumball- and toy-dispensing bulk vending machines. ACMI distributes to outlets such as retail discount superstore Wal-Mart, restaurant chain Denny’s and Kroeger’s grocery stores. The company also has operations in Mexico and Puerto Rico.
Wellspring bought ACMI in February of 2002 in a going-private transaction into which the firm invested $30 million in equity, with an additional $10 million invested later in the investment cycle – the firm acquired five companies to expand the company’s product line and geographic reach. Wellspring partner Bill Dawson, Jr., said at the time of purchase, ACMI had been languishing as an orphaned public company, with a small market capitalisation and no sponsorship. As of 2003, company sales had grown to $214.8 million, up from $141.9 million in 2001.
One of Wellspring’s changes was moving ACMI’s distribution center from the US to China, since most of the plush toys used in the company’s crane machines are manufactured in China. In addition, Dawson said the firm changed the management, bringing in a chief financial officer, a head of sales and marketing and handful of senior managers to improve AMCI’s efficiency.
Although Wellspring typically holds it portfolio companies for about five years, Dawson said Coinstar – which operates coin counting machines in US grocer stores – approached the firm and offered a bid which hastened the exit. Coinstar and AMCI both have route-based business models, meaning they require drivers to travel from location to location, restocking machines and collecting money.
Wellspring currently manages more than $1 billion in equity and is currently investing from its $675 million Wellspring Capital partners III, which closed in April of last year. This past April, the firm agreed to sell its stake in The Hockey Co. to Reebok in a deal valued at approximately $330 million.