New York-based Behrman Capital acquired Hunter Defense Technologies in a $90 million deal, a transaction that closed in the last week of December.
Hunter, based in Solon, Ohio, is a manufacturer of defense and homeland security products, and produces air filters and filtration systems used in military and security applications. The company also supplies heating equipment for military vehicles, tents and temporary shelters.
“This is a sector we’ve been looking at for some time,” said Grant Behrman, a managing partner with Behrman Capital. “This company has a very strong position in its respective military markets, and we believe it should be able to take advantage of the emerging opportunities in the homeland security marketplace.”
To finance the transaction, Behrman put in an equity stake of roughly $50 million, with the balance of the purchase price comprised of a Merrill Lynch and Madison Capital-backed senior debt package and a subordinated debt contribution provided by Albion Alliance.
In growing Hunter, Behrman will primarily rely on a mix of acquisitions-focusing on the expansion of its product line-and organic growth. Grant Behrman noted that the company has already made substantial gains in the last four years, with revenue increasing in excess of 35% during that time, and he believes the company’s exposure to homeland security should provide an appealing market for future growth.
Last year, the government appropriated roughly $50 billion for state and local governments to bolster security against terrorist threats, and in October, President Bush designated $29.4 billion for the Homeland Security Department’s budget. These flows of money have not gone unnoticed by the private equity community, and firms have been quick to target this developing industry. In addition to a number of individual transactions that target the homeland security sector in recent years, select firms have even started funds dedicated exclusively to the space. Paladin Capital Group has established one such fund, while Bear Stearns Merchant Banking has teamed up with Giuliani Partners to pursue deals in the security and public safety arena.
For Behrman, the deal represents its second acquisition in the aerospace and defense sector, having last year acquired ILC Industries in a $303 million transaction. ILC is perhaps best known for its airbag and ballute systems, which made headlines this past month for their role in the safe landing of the MER Pathfinder on Mars. ILC also makes blimps, space suits, chemical-and biological-warfare protection suits and data conversion products for the defense and aerospace industries.
To purchase Hunter, Behrman used its $1.3 billion Behrman Capital III fund, which, following this latest transaction, is roughly 50% deployed.