Heritage Sells IMPAC, Acquires Prochem –

Boston-based private equity firm Heritage Partners this month signed an agreement with management of portfolio company IMPAC Group Inc., an entertainment packaging company, to sell its shares to Westvaco Corp. for an estimated $500 million.

Westvaco was advised by J.P. Morgan and IMPAC was advised by Deutsche Bank on the transaction.

“We were approached by Westvaco, who was expanding into this marketplace, and it reached a point where the offer they made us was very attractive and it fit into the long-term objective of the management team,” said Peter Hermann, a general partner at Heritage Partners.

Melrose Park, Ill.-based IMPAC’s enterprise value exceeds $500 million. In 1999, the company’s revenue totaled approximately $60 million.

Hermann said Heritage’s involvement in the specialty packaging industry began in mid- 1996, when it acquired a company called Klearfold Inc., a family-owned manufacturer of plastic and combination specialty packaging for the cosmetics industry. The IMPAC Group was formed in early 1998 through the merger of Klearfold and AGI Inc., a manufacturer of high-end paper and paperboard specialty packaging for the entertainment and cosmetics industry. The IMPAC Group expanded its operations in the U.K. later in the year with the acquisition of publicly traded Tinsley Robor plc., a U.K. specialty packaging company, for $125 million.

Hermann said Heritage realized close to a 50% annual rate of return on IMPAC. “It was a very good result from our perspective,” he said. “We’re always trying to find exits that work both for us and the management team that we’ve partnered up with.”

Keeping it in the Family

Another family-owned business acquired by Heritage includes the acquisition of Advance Watch Co., a designer and manufacturer of consumer products with precision instruments, for approximately $100 million (BUYOUTS Feb. 22, 1999, p. 22).

In a separate transaction, Heritage Partners’ portfolio company Windsor Holdings Inc., a provider of carpet and floor cleaning equipment to larger businesses and contract cleaners, acquired Professional Chemicals Corp. (Prochem), a producer of floor cleaning equipment and chemicals for the carpet cleaning market, for approximately $40 million.

Heritage Partners will own a 70% stake in the company. Banks involved in the facility include Fleet Boston, Norwest Corp., PNC Equity Management Corp., National City Bancorp and US Bancorp.

“This was originally a private IPO transaction with the Francis family, so it was a classic Heritage deal,” said Hermann. Heritage originally acquired a company called Century 400, which was a smaller competitor of Prochem, about 18 months ago and was aware of the family-owned Prochem and was looking forward for a chance at some stage to put together something with them, said Hermann. “And within a year we sat down with the owners of the company, who were very intrigued at the idea of teaming up with us, and we put this together painlessly over the last four or five months,” he said. “What we’ve built now is a very large company in the sector with a market share of about 26%, which would make us by far the largest player in the sector.”

Hermann also said Heritage Partners is currently in negotiations with two other companies within the sector to further expand the platform.

Prochem is based in Chandler, Ariz., and had annual revenues of approximately $40 million in 1999.The combined revenues of both companies will be about $120 million. Hermann said equity for the transaction came out of Heritage Partners’ Fund II. Heritage Partners held a final close on Heritage Fund III at $843 million last year (BUYOUTS July 5, 1999, p. 1). “We’ve put about $200 million to work in Fund III, which is on target because we’re hoping to invest about $200 million per year,” said Hermann.

Heritage Partners provides growth equity capital to family-owned businesses and was founded in 1994.