Golden Gate Buys Hispanic Marketing Company For $40M –

Golden Gate Capital recently announced the acquisition of Lexicon Marketing Corporation, a provider of bilingual materials for U.S. Hispanics, for $40 million. According to Jesse Rogers, a managing director with Golden Gate, the purchase price was 3.5 times EBITDA. Bank of New York provided the senior debt.

Former Lexicon owner Jose Luis Nazar provided additional debt in the form of a seller note. Nazar will remain as chairman of the board, and Valerie Rico and Brian Archibald will remain as COO and CFO, respectively.

The equity contribution was $20 million, or 50% of the total purchase price, and was derived from Golden Gate’s $700 million inaugural fund. The fund, closed in December 2000, is approximately 50% invested.

“This deal is somewhat similar to other deals that involve an entrepreneurial owner, in that it took time [for Nazar] to reach a comfort level with us,” said Rogers. “The entire process took about two years.”

Lexicon, founded in 1974, sells bilingual educational materials and operates call centers with telemarketing and customer service capabilities for the U.S. Hispanic market.

“Lexicon is attractive to us in part because the Hispanic demographic is so large yet so underserved,” said Rogers. “We believe Lexicon’s market share will be a significant barrier to entry for potential competitors, and we look to push additional products through this pipeline. We have talked with a number of people prominent in the Hispanic community, and they are interested in anything that will bring more services into this community.”

Rogers mentioned financial services and insurance as sectors Lexicon can potentially market to the Hispanic community.

According to a recent report authored by the U.S. Census Bureau, Hispanics are the fastest growing segment of the U.S. population, and the largest minority segment overall. In a six-year span beginning in 1997, the U.S. Hispanic population has grown from 29.7 million to 35.9 million, and the report also stated 90% of Hispanic Americans learn Spanish as their first language.

Prior to the Lexicon transaction, Golden Gate has been busy over the last 18 months, making 13 acquisitions spread across the software, electronics manufacturing, financial services and media sectors. The buyout shop’s most recent acquisition was the November 2002 purchase of Computer Associates’ banking unit (see Buyouts, 11/18/2002). The San Francisco-based firm partnered with Parallax Capital Partners, an Irvine, Calif.-based private investment firm, on that deal.