Berkshire Inks U.S. Can Public-to-Private Deal –

In a public to private transaction set to close in September, Berkshire Partners and two U.S. Can Corp. executives have formed a corporation that has agreed to buy U.S. Can, a steel container manufacturer, for $20 per outstanding share of common stock.

Should the deal close, Berkshire, Salomon Smith Barney Inc. and Banc of America Securities LLC will commit the equity and debt financing. Carl Ferenbach, a managing director at Berkshire, declined to disclose how much his firm will contribute to the deal, but said Berkshire is the principal equity holder “by far.”

The two U.S. Can executives involved in the buyout are Paul Jones, chairman and chief executive of U.S. Can, and John Workman, chief financial officer.

Berkshire Partners did not just happen on to this deal by chance.

Berkshire’s Ferenbach helped organize U.S. Can in 1983 with the acquisition of three plants from the Sherwin Williams Co.

He remained on the board and owned stock in U.S. Can up until February of this year when he gave up his position because he didn’t have time to serve on the board of a non-Berkshire investment, he said.

But after September, he will no longer be able to use that excuse.

Ferenbach will once again join the company’s board when the deal is signed, joining two other original 1983 investors in the company Ricardo Poma and Francisco Soler – and Louis Susman (tk), a vice chairman at Salomon Smith Barney, who became an investor in 1990.

The $20 per share price for U.S. Can represents a more than 50% premium to the company’s average closing price for the 30 days prior to the announcement of the original proposal made in March.

Undervalued Stock

Jones became CEO of U.S. Can just over two years ago. Financial results have improved since he was recruited, Ferenbach said, but the stock market, prior to the buyout announcement, continued to value the company at $13 to $14 per share.

“That’s just not the kind of reward the management expected to get for its efforts, so the opportunity for the buyout was created,” Ferenbach said.

Ferenbach also referred to a public statement issued by Jones, saying he echoed Jones’s sentiments in the statement.

“Despite having shown strong earning growth and substantially reducing debt in 1998 and 1999, the price to earning multiple contraction experienced in the old economy stocks has caused our stock price to decline,” Jones said in a statement. “This transaction is an excellent opportunity for shareholders to receive a substantial premium for the U.S. Can shares.”

Under private ownership, U.S. Can will put emphasis on three initiatives, Ferenbach said. These include continuing Jones’s active acquisition program, improving operations and continuing relationships with existing customers, he said.

The transaction is subject to a number of conditions, including approval of U.S. Can’s shareholders, receipt of financing and receipt of governmental approvals. It has been approved by a special committee of independent members of the board of directors of U.S. Can.

At press time, U.S. Can’s stock was trading at $18.44 per share.