In late February, an investor group that included Blum Capital Partners, Fremont Partners, DLJ Merchant Banking and Goldman Sachs floated Kinetic Concepts, Inc. (KCI) in a $620 million IPO on the New York Stock Exchange. The company priced its IPO at $30 a share, and closed its first day of trading at $40.40 a share.
Through the investment in KCI, a manufacturer of hospital beds and wound care technology, the investor group struck gold. This past August, Blum Capital Partners and Fremont Partners took back a total of $335 million in a $1.1 billion recapitalization, in which DLJ and Goldman Sachs joined the investment with a $72 million contribution.
Immediately following the recap, Blum Capital and Fremont reinvested $126 million in the company’s convertible securities. The pair then sold 11.04 million shares in the February IPO, yielding $331 million in proceeds, and still holds a 38.7% stake.
DLJ and Goldman Sachs, meanwhile, held onto their shares in the floatation, and currently hold an 8.1% stake together.
Regarding Blum Capital’s initial investment in the company in 1996, Blum Capital Managing Partner Colin Lind stated, “In KCI we found a small cap stock that was basically a business that had been very stable as far as cash flow, but the stock was under pressure at the time because the founder still owned 70% of the business.”
The firm teamed with Fremont to take the company private in 1997, following initial block investments by Blum throughout the preceding year.
In the IPO, Merrill Lynch & Co. and J.P. Morgan Chase & Co. led the underwriting syndicate, while Skadden, Arps, Slate, Meagher & Flom and Cox & Smith provided legal counsel to KCI.