Exits: Vestar Sells Off Pinnacle for $368M –

Vestar Capital Partners this month sold its ownership of materials-handling company Pinnacle Automation Inc. to London-based FKI Plc for $368 million in cash and stock. FKI will also assume $57 million in debt.

Vestar managing director Prakash Melwani said the firm will make about seven times its $11.5 million investment in the St. Louis-based company. Chase Equity Partners, the second largest investor after Vestar will take a profit of about $20 million from the sale. The deal is expected to close this month.

Pinnacle specializes in equipment used for moving products. The company has developed software and processes to manage distribution and fulfillment more effectively. Its customers include brick-and-mortar companies like Wal-Mart Stores Inc., Anheuser-Busch Cos. and Target Stores as well as Internet-based companies.

In 1998 Pinnacle had a profit of $7.4 million before taxes and exceptional items on sales of $299.7 million. In the nine months ended Sept. 30, 1999, the company reported significant increases in new order bookings to $321.8 million, about 44% above bookings in the year-earlier period, due to record demand from e-commerce companies.

Melwani said Vestar had considered holding on to Pinnacle longer to use as a platform, but decided instead to seek a buyer for the company. Warburg Dillon Read advised Vestar on the sale.

“There were a lot of people interested in buying the company,” Melwani said. “It’s a low risk way of playing the Internet. There’s rapid growth without the risk of a new business model.”

About one-fourth of Pinnacle’s business comes from Internet-based clients. Melwani said Internet-based commerce has increased the demand for efficient fulfillment. “They’ve become more and more concerned with making sure they get people who are capable of doing it,” Melwani said. “Pinnacle has become a leader in that area.”

The acquiring company, FKI, specializes in material handling, hardware and engineering. It will merge Pinnacle’s operations with FKI Logistex, its newly created supply chain division. The group will include Pinnacle, Crisplant, which it agreed to buy in May for GBP186.5 million, and two other businesses that specialize in materials handling equipment and integration.

“It’s such a synergistic buy for FKI,” Melwani said. “By combining the companies they are a really strong force in e-commerce distribution.”

Last month Vestar agreed to take gear maker, Gleason Corp., private in a deal worth $332 million, the first deal from its $2.5 billion megafund (BUYOUTS, Dec. 20, 1999, p. 8).