Jacuzzi Brands Inc., the West Palm Beach, Fla.-based manufacturer and distributor best known for its bath and spa products, is bailing itself out of financial trouble by unloading its underperforming and non-core assets. Not surprisingly, private equity firms have been among the buyers bubbling up to purchase the unwanted assets.
The latest Jacuzzi-owned subsidiary that will find itself under a private equity firm’s ownership is Eljer Plumbingware Inc., currently a part of Jacuzzi’s consumer bath division. Late last month, Jacuzzi struck a deal with Sun Capital Partners wherein Eljer will become a stand-alone portfolio company of the firm’s by July 2, the end of Jacuzzi’s third fiscal quarter. Financial terms of the transaction were not disclosed.
Headquartered in Dallas, Texas, Eljer Plumbingware offers a line of ceramic, composite and iron sanitary ware including bathtubs, toilets, bidets, sinks and faucets under its own brand name. For the year ended Oct. 2, 2004, Eljer recorded an operating loss of $30.7 million on sales of $150.5 million. And for the first six months of Jacuzzi’s fiscal-year 2005, which ended on Apr. 2, Eljer recorded an operating loss of $2.9 million on sales of $69.2 million.
Sun will assume most of the current assets and liabilities of Eljer, which include its long-term retiree medical and life insurance liabilities, as well as its manufacturing operations in Tupelo, Miss. and Ford City, Pa. Jacuzzi. On the other hand, Jacuzzi will retain Eljer’s Salem, Ohio manufacturing facility property, which was closed in 2004.
“Despite ongoing product rationalization efforts and other initiatives, Eljer has continued to incur losses and consume a significant amount of management’s time,” said David Clarke, Jacuzzi’s chairman and CEO.
For Sun, which focuses on distressed situations, Eljer is a good fit for reasons other than just its troubling financial characteristics. The Boca Raton, Fla.-based firm recently versed itself in the art of plumbing through a previous investment that seems to be panning out nicely. Earlier this year, Sun acquired a controlling interest in Crane Plumbing LLC, a manufacturer and distributor of plumbing fixtures and products in the U.S. and Canada. Having made the investment in February, Sun wasted no time putting Crane to work. In April 2005, after 150 years as a domestic manufacturer of plumbing fixtures, it was reported that Crane is moving aggressively to integrate off-shore sourcing with domestically manufactured products within its product lines.
Sun typically invests between $5 million and $25 million of equity in troubled companies that have revenues between $50 million and $2 billion, holding its portfolio companies for an average of three to four years. Though firm recently wrapped up fundraising on its fourth investment vehicle, collecting $1.5 billion in dry powder, Sun Vice President, A. Richard Hurwitz said at the time that equity for the firm’s next couple investments would still come from the $500 million Sun Capital Fund III.
The sale of Eljer to Sun represents the second sale agreement made by Jacuzzi in as many weeks. Earlier in May, Jacuzzi agreed to sell 70% of its vacuum cleaner manufacturer Rexair Inc. to London-based Rhone Capital LLC in a transaction valued at $170 million, noting that it was a non-core asset. Rexair generated sales of approximately $104.8 million and operating income of approximately $27.3 million in the fiscal year ended Oct. 2, 2004. Equity for that transaction will come from Rhone Partners II LP, while financing will be provided by Credit Suisse First Boston.
Sun did not return calls by press time.