Atlantic Street Delivers Early Exit

Target: Fleetgistics Holdings Inc.

Price: $80 million

Seller: Atlantic Street Capital Management LLC

Sponsor: Harbour Group

Atlantic Street Capital Management, a lower mid-market investment firm, sold delivery services provider Fleetgistics Holdings Inc. to Harbour Group, a St. Louis, Mo.-based buyout shop, as Buyouts first reported.

The deal is Atlantic Street’s first exit and a huge winner, generating 7.7x the Stamford, Conn.-based firm’s $10.4 million equity investment and an internal rate of return of 156 percent, according to a press release Atlantic Street issued just before deadline.

Fleetgistics has three divisions: Medifleet, which provides same-day delivery services to hospitals, laboratories and other medical-related institutions; Partsfleet, which delivers automotive parts and other supplies; and Scriptfleet, which provides delivery services for long-term care pharmacies. The investment began for Atlantic Street Capital in June 2007, when the firm bought Ace Expediters, an Orlando-based courier company that later became Fleetgistics with the acquisitions of two other courier companies: Express Courier Systems Inc., a West Haven, Conn.-based company, in April 2008, and Network Express Inc., a Clearwater, Fla.-based company, in March 2009. Today that company operates in more than 80 cities and 30 states.

Atlantic Street Capital has been investing from a $45 million pool of capital provided by Morgan Stanley Alternative Investment Partners. The successful exit could help the firm as it seeks to raise its second fund; Buyouts reported in June 2009 that the firm was getting ready to seek as much as $100 million for a follow-up vehicle. For Harbour Group, the investment would come out of its fifth fund, according to a regulatory filing. Harbour Group raised $505 million for that fund in 2006, according to Capital IQ.

Managing Partner Peter Shabecoff, a lawyer and former partner at Greenwich, Conn.-based mid-market buyout shop North Castle Partners, founded Atlantic Street Capital in June 2006. The firm invests in turnarounds, restructurings, businesses in bankruptcy and spin-offs with negative operating cash flow and customer concentration. It typically invests between $5 million and $15 million of equity in companies generating revenues of $25 million to $120 million.

The firm has two other portfolio companies: Double B Foods, a DeSoto, Texas-based maker of meat snacks and frozen food it bought in 2006; and EZE Trucking Inc., a Rialto, Calif.-based company it bought in April 2009 that helps deliver cranes and other heavy products used in the infrastructure industry.