Buyout Wrap: Old Economy Spurs New Deals

The buyout market is being invaded by mundane deals. With lenders and equity providers alike looking for the recession-resistant companies to bring into their portfolios, it’s the most basic Old Economy concerns like health care, energy and packaging companies that are getting a significant amount of attention.

Demand, in fact, target=new>sealed the deal for First Reserve Corp., which recently committed to a new buy-and-build platform made up of businesses related to power equipment and services. With the firm’s recent purchase of C&W Fabricators, a manufacturer of components for the gas turbine generation industry for approximately $60 million, it plans to capitalize on the current electricity shortage in the U.S. The imminent future demand makes the power equipment and services segment less cyclical than other energy-related areas, said Joe Compofelice, chief executive of the as-of-yet-unnamed holding company sponsored by First Reserve.

Indeed, due to the nation’s electricity shortage, the U.S. government has developed an aggressive plant to build 1,300 gas-fired plants over the next 10 years. There is also an effort to maintain and upgraded older coal-fired plants as a part of the overall plan. First Reserves’s plan is to provide equipment to the new plants and services to the older ones, Compofelice added.

The fact that health-care companies have come back into favor for buyout firms is no surprise. Now that the reimbursement issues of the 1990s have stabilized, the steadiness of the industry has once again brought it onto the radar screen.

But, with somewhat less fanfare, plastics and packaging deals are popping up. Last month, Chicago-based Glencoe Capital, through its portfolio company Premium Foods Group, purchased Fischer Packaging Co. and Field Packaging Co. from the Soparind Corp. Also, Minneapolis-based Spell Capital Partners has acquired injection milding company McKechnie Plastic Components from the McKechnie Group. Sources at these two firms cited predictable profitability as reasons for investment and ability to secure financing.

Leslie Green can be contacted at: Leslie.Green@tfn.com

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