Another Air-Tight Riverside Exit –

Earlier this month, The Riverside Co. announced that it has completed its exit of Selig Sealing Products Inc., a standalone portfolio company it acquired just under three years ago. The New York-based buyout shop sold 100% of its control stake in the packaging product maker to Behrman Capital in a secondary transaction valued at $100 million.

Forrest Ill.-based Selig specializes in the manufacturing of a variety of heat induction foil and plastic innerseals used to preserve domestic foods, beverages and over-the-counter pharmaceutical products. Founded in 1972, Selig was acquired by Riverside in June 2002 in a transaction that included equity from the firm’s $412.8 million Riverside Capital Appreciation 2000 fund.

The realization of this investment comes a little earlier than is characteristic for a Riverside deal-a factor the firm attributes to Selig’s good health and strong overall market conditions.

“We had encountered some nice growth in the business and we simply thought we came to a point where we could generate some good returns for our investors,” Bob Fitzsimmons, a managing partner at Riverside, told Buyouts. “We have a typical holding period of three to seven years for our investments and expect to keep most of them for an average of about five-this one just happened to be closer to the three-year side.”

Fitzsimmons declined to disclose Riverside’s IRR on this investment, citing an agreement with Behrman to keep return data confidential. Likewise, he declined to comment on Selig’s current financial standing. He did, however, say that Selig had experienced double-digit growth in EBITDA for the five years prior to Riverside’s investment in it and that Riverside was able to maintain that rate of growth throughout its holding period.

“There is a continuing conversion from glass and metal [packaging] to plastic, which helps companies like Selig that specialize in manufacturing air-tight sealing products for plastic containers,” Fitzsimmons said.

Also, the increased use of dispensing closures (the flip-top lids often seen on ketchup, mustard, salad dressing and, more recently, jelly containers) by food companies is another industry trend that’s been kind to Selig. “You often find these packages resting upside-down on store shelves, which means that they absolutely must have leek-proof seals,” Fitzsimmons added.

Behrman Capital seeks profitable companies with revenues between $50 million to $500 million for its leveraged acquisitions, typically placing $25 million to $100 million of equity in each.

For Behrman, this is the second investment in the specialty packaging niche in the past six months. Last October the firm acquired Pelican Products Inc., a manufacturer of watertight protective cases.

In conjunction with this transaction, Selig has obtained a $62 million credit facility from Madison Capital Funding to finance further growth initiatives while it is a portfolio company in the $1.2 billion Behrman Capital Fund III LP, which closed in 2000.

To add value to Selig, Riverside expanded the company’s production capacity by investing in plant expansion, new equipment and new product development. No add-on acquisitions were made. “We typically like to make add-ons, but this one had enough organic potential that we did not have to,” Fitzsimmons said.

This is Riverside’s second realization from its RCAF 2000 fund in about a month. In March, the firm sold Clayton Group Services, a provider of occupational health and safety services, environmental services and laboratory analysis, to U.S. Laboratories. The sale generated a 47.4% gross IRR and a 4.1x gross cash-on-cash return for Riverside’s investors.