DLJ Expands Its Trash Business Holdings

Target: Deffenbaugh Industries Inc.

Price: Undisclosed

Sponsor: DLJ Merchant Banking Partners

Financial Advisor: Buyer: Credit Suisse

Legal Advisor: Buyer: Bryan Cave; Davis Polk & Wardwell

Following a successful exit from the trash business earlier this year, DLJ Merchant Banking Partners has jumped back into the sector by agreeing to buy a Midwestern garbage hauler and landfill operator.

The New York-based buyout firm, an affiliate of Credit Suisse Group, is spending an undisclosed amount of money for Deffenbaugh Industries Inc. Sources told the Kansas City Star newspaper that the company likely sold for between $300 million and $350 million, based on estimated revenue.

Founder Ron Deffenbaugh, who built the business over the last 50 years after starting with a single truck when he was 16, is cashing out. The rest of the senior management team is staying put and keeping some equity in the company.

Deffenbaugh Industries, based in Shawnee, Kan., is the largest waste management company in the Kansas City area and has significant operations in Omaha, Neb. The company serves 450,000 customers in four states, and owns an 800-acre landfill outside Kansas City. Deffenbaugh Industries also has a rock-quarrying business and operates a portable-toilet division called Johnny on the Spot.

“Deffenbaugh is a fixture and a marquee brand in the Kansas City area,” said Edward Johnson, a DLJ managing director who led the deal.

The Deffenbaugh Industries acquisition plunges DLJ back into waste management, an industry that’s been good to the firm. Earlier this year, the shop exited its investment in trash equipment company Wastequip, generating a 3.1x return over 18 months, which translated to an IRR of 150 percent. In 1999, DLJ joined with The Blackstone Group and Apollo Management to buy a minority stake in Allied Waste Industries Inc. just as it bought competitor BFI. DLJ also owns United Site Services, the nation’s largest portable-toilet provider.

The latest deal came to DLJ through one of the firm’s principals, Ryan Sprott, a native Kansan who was familiar with Deffenbaugh Industries. Until this year, the company’s founder had never expressed an interest in selling his company, and he didn’t put it up for auction, Johnson said.

This is a platform acquisition for DLJ, and the firm expects to make add-on acquisitions, expand Deffenbaugh’s geographic footprint, and extend its menu of options, particularly for municipal clients.

Credit Suisse arranged the deal’s debt facility, and DLJ’s mezzanine fund took the biggest piece of the mezz tranche. The deal is expected close by the end of the year.—J.H.