CHS Grabs Lining Co. –

Code Hennessy & Simmons agreed just before the New Year to acquire Gundle/SLT Environmental Inc. in a public-to-private deal valued at roughly $220 million. The transaction is expected to close in March. However, the deal still has some hurdles to jump, including antitrust clearances, shareholder approval and other customary conditions, as well as a putative class-action lawsuit levied against the firm and Gundle/SLT.

Gundle/SLT is a manufacturer and installer of lining for landfills and man-made ponds. The company also has a reach in the mining industry, and is used specifically for applications in leach heap above-ground mining. The company last reported net income of $17.3 million, on revenues of $218.7 million for the nine months ended Sept. 30, 2003.

To acquire Gundle/SLT, CHS agreed to pay $18.50 a share, which represents a more than 10% discount to the company’s stock price the session prior to the deal’s announcement. CHS is currently working with UBS on a financing package, which will be made up of either a combination of senior debt and mezzanine or will include a high-yield offering.

The lawsuit against the company and CHS cites a breach in fiduciary duty by management in approving this deal, and through the lawsuit, the complainants seek to block the acquisition. Dan Hennessy, a partner and co-founder of CHS, called the lawsuit “baseless and without merit,” and said, “We’ll be closing in March as planned.”

While that has become the standard response when faced with allegations, in this instance the lawsuit does appear to lack teeth. The acquisition has received clearance from the boards of both companies, and Wembly Ltd., which holds approximately 40% of Gundle/SLT’s outstanding common stock, has already voted its stake in favor of the sale.

Further, Salomon Smith Barney, in a research note to clients, wrote, “This [sale] announcement does not come as a surprise, as GSE had been in a strategic review process for nearly a year… Although the buyout price per share of $18.50 is below the last trading price of $20.76 on Dec. 31, 2003, it is essentially in line with our previously noted leverage buyout share price [estimate] of $18.80.”

Provided the sale does go through, Hennessy said CHS would pursue growth for Gundle/SLT through acquisitions and expansion into new regions. “With new product development and additional marketing we can expand into some of the high growth, developing regions of the world such as China and the Middle East,” Hennessy said. “We will also continue to pursue an acquisition strategy in Asia, North America and Eastern Europe.”

Code Hennessy & Simmons will use its 1999-vintage $1 billion fund, Code Hennessy & Simmons IV, for the transaction.