Castle Harlan Exits Ames True Temper
Sale to publicly held Griffon roughly doubles firm's money.
July 20, 2010
Following a roughly six-year holding period, private equity firm Castle Harlan is exiting its investment in lawn and garden toolmaker Ames True Temper, selling the company to diversified holding company Griffon Corp. The deal is valued at $542 million, which depending on working capital adjustments, should work out to a more than 2x return for the sponsor.
Ames True Temper, based in Camp Hill, Penn., manufactures and sells lawn and garden equipment such as rakes, shovels, wheelbarrows, pots and planters, in addition to snow and striking tools.
Justin Wender, president of Castle Harlan, identified that the consumer pullback following the credit crisis and the company’s exposure to construction created headwinds that likely delayed the exit for the firm. Standard & Poor’s, early last year, even placed Ames True Temper on its “Weakest Links” list, but in September upgraded the company’s debt, citing sustained improvement in liquidity and a stable outlook.
Despite the rough patch, Wender notes the company’s profits grew from the mid-$50 million range to $78 million under Castle Harlan’s watch, a result of acquisitions, improved product mix and international initiatives. The company secured two deals, acquiring Acorn Products, maker of UnionTools, and Hound Dog Products -- completed within a week of each other in April, 2006.
In Castle Harlan’s original purchase of the company, in June, 2004, the firm paid $380 million, securing an 87% stake in the business, according to SEC filings. Castle Harlan, out of its fourth fund, committed a total of $97 million of equity, including various purchases of the company’s bonds.
Castle Harlan is seeing some turnover in its portfolio. In the last week of June, it sold Associated Packaging Technologies to NYSE-listed packaging company Sonoco and last November, its Australian affiliate, CHAMP Private Equity, unloaded United Malt to GrainCorp through a $665 million deal.
The firm, which is currently investing out of its fifth fund, has also sealed a few new deals over the past six months, buying automotive aftermarket product maker IDQ from Arsenal Capital Partners and specialty plastic packaging company Pretium Packaging. Castle Harlan closed on $716 million for Fund V, according to a Form D filing submitted in February. Earlier filings identified a $1.5 billion target for the fund.
In the Ames True Temper sale, Wender noted that the auction drew a mix of strategic and financial buyers. He added that the sale to Griffon underscores that leverage is “generally available.”
According to the terms, Griffon Corp. is contributing roughly $75 million in cash, while lining a $500 million term loan from Goldman Sachs to help pay for the deal. Part of the committed financing is made up of a $150 million ABL facility. At the close, anticipated by September, Griffon will have in excess of $200 million of cash at its disposal. The acquisition is expected to be accretive to cash flow and earnings in fiscal 2011.
Robert W. Baird & Co. advised both Castle Harlan and Ames True Temper management, while Credit Suisse and UBS served as advisors to the company on the sale.
For more information on related topics, visit the following:
