CCMP Buys A Fixer Upper

CCMP Capital Advisors LLC plans a thoroughgoing overhaul of Infogroup, a troubled database marketing company that it took private at mid-year. The New York buyout shop acknowledges that the approach is more complex than in a typical deal.

“It’s a very solid company with very solid growth prospects, but it also has elements of turnaround and elements of transformation,” said Richard Zannino, a managing director at CCMP Capital who was named chairman of Infogroup’s newly constituted board of directors.

CCMP Capital, which closed its latest fund at $3.4 billion in 2007, announced the completion of its deal on July 1. The firm paid $668 million, or $8 per share, which amounted to 7x trailing 12-month EBITDA, Zannino said. CCMP Capital put up $353 million of equity, covering 53 percent of the price, and used a $315 million term loan for the rest.

In addition to Zannino, a former chief executive officer of Dow Jones & Co. who joined the firm a year ago, CCMP Capital also installed Clare Hart as Infogroup’s president and chief executive officer. Hart had been one of Zannino’s key lieutenants at Dow Jones and had been president and chief executive officer of Factiva, the online news archive, when it was a joint venture of Dow Jones and Reuters, publisher of Buyouts.

CCMP Capital also brought in Dow Jones veterans to serve as chief financial officer and head of human resources, as well as some newcomers for other key strategy positions.

Zannino joked that when he sat down with Hart to discuss a 100-day plan for Infogroup, which is based in Omaha, Neb., they came up with 400 days of work. “The thesis was that we could take a chronically undermanaged business, which was a collection of 20 or 25 disparate, disconnected business units, and combine them into three or four cohesive business units,” he said.

Founded in 1972 by entrepreneur Vinod Gupta to provide a directory of sales leads to mobile home manufacturers, Infogroup ultimately built a database containing information from the nation’s 4,400 Yellow Pages directories. After it went public in 1992, it began growing by acquisition. Today, Infogroup’s custom databases contain 200 million consumer names and details on 16 million businesses. It conducts campaigns via direct mail, telesales, and e-mail for a client roster that includes Hewlett Packard Co., American Express Co., Coca-Cola Co. and FedEx Corp., Zannino said.

Gupta allowed Infogroup’s acquisitions to operate largely independently, never integrating them into a cohesive sales organization. And when Gupta left the company in 2008, after the Securities and Exchange Commission accused him of improperly billing the company for millions of dollars of personal expenses, the business languished. The board hired Evercore Partners as an independent financial adviser in December 2008 and announced Infogroup’s deal with CCMP Capital in March.

“In a way it’s tailor made for private equity ownership,” Zannino said. “As a private company, the company has the flexibility to focus on what they want to achieve two years out rather than what’s going to happen next quarter.”

CCMP Capital, the former merchant banking arm of JPMorgan Chase, plans to professionalize Infogroup’s business, improving its strategic planning and budgeting, step up cross-selling efforts and expand its capabilities in developing markets such as social media, paid search, and mobile media, he said. “We can stop competing against one another, which they were doing under the old regime.”

“We’ve got a couple of solid years of pulling hard on the oars,” said Kevin O’Brien, a managing director at CCMP Capital. “A deal like this would be much more difficult to undertake without somebody like Rich as a core part of the team.”