Compass Group Scores A Hit With Purchase –

A relatively small deal is turning into something big for the The Compass Group. Through its portfolio company, CPM Acquisition Corporation, Compass acquired 100% of the assets of Beta Raven Systems from Raven Industries Inc., a diversified manufacturing and distribution company in Sioux Falls, S.D. The deal was financed by debt from Harris Bank and U.S. Bank, a subsidiary of U.S. Bancorp Piper Jaffray. While specific terms were undisclosed, Raven Industries received less than $10 million for its subsidiary, and Compass said it will turn a profit from Beta Raven, which operated at a loss just one year ago.

“We paid down enough debt from our May 2001 purchase of CPM to completely finance the Beta Raven acquisition,” said Joseph Massoud, managing director at The Compass Group, which owns 80% of acquiror CPM. “This deal has already significantly raised Beta Raven’s revenue; in fact, in our four months of ownership we nearly matched their revenue for all of 2001.” Tom Waitman, CEO at CPM, said the two companies, along with CPM’s other subsidiary, RossKamp Champion, reported $64 million in sales and $13 million in EBITDA for the fiscal year ending September 2002. “All three companies share a customer base, so this acquisition affords tremendous growth potential for our businesses,” Waitman explained. He predicted Beta Raven revenue will top $4.4 million in 2003, a threefold increase from 2001. But it’s not the size of the deal that has Compass and CPM officials excited – it’s the integration with their existing portfolio.

CPM holds roughly 70% of the worldwide market share in its sector, which includes the manufacture of palletizing equipment for the animal feed industry and milling equipment for the oilseed processing industry. Beta Raven builds and distributes the computerized process controls and ingredient scaling systems used in the equipment built by CPM. “We are now the only manufacturer of processing equipment that can sell fully pre-integrated control and machinery package together,” Massoud said.

The deal was born from a phone call between two CEOs. When Waitman phoned Raven Industries President and CEO Ron Moquist and explained how CPM could enhance Beta Raven’s revenue, Moquist accepted on the spot and the deal was effectively done. “Beta Raven was under-marketed and we thought we would be able to make more of the company in the long term,” Massoud said. Waitman concurs. “Beta Raven didn’t really mesh with Raven’s other companies, but they are a great fit with ours.” CPM, based in Iowa, has facilities in the U.S., the UK, Europe and the Far East, and current customers include Cargill, Archer Daniels Midland Company, Tyson Foods, Inc. and Perdue Farms, Inc.

Compass handles 25% of the more than $1 billion in assets held by the TK Foundation, established by the late shipping magnate, J. Torben Karlshoej. “We focus on complex transactions, and we have typically been able to close deals that may have been too tough for others to handle,” Massoud said.

In related news, The Compass Group announced the opening of an office in Irvine, Calif., to be headed up by Elias J. Sabo and David M. Browne. Both will relocate to the West Coast to concentrate on small and mid-sized companies in mature industries. While specifics were withheld, The Compass Group is looking to sign two letters of intent for new acquisitions on the West Coast before Christmas.