For its seventh acquisition in less than a year, Lincolnshire Management has acquired recycling company NexCycle Inc. through its second fund, which gathered more than $300 million for a final close last year.
Doug Bagin, senior managing director at the New York-based firm, would not disclose the amount it invested in NexCycle, although Lincolnshire typically invests between $5 and $50 million in each portfolio company. There were no co-investors, although management invested alongside of Lincolnshire, which took a majority stake.
Bagin said what attracted his firm to NexCycle was that it’s a non-cyclical business in an industry that continues to grow at a rate of about 5% a year. It’s the first recycling company invested Lincolnshire has invested in. Lincolnshire believes that growth opportunities within the recovery and recycling industry are driven by an increase in the number of consumer beverage containers being recycled, a growing acceptance of the use of recycled products, and the energy savings that results from the recycling of aluminum and glass. Moreover, although financing remains tough, Lincolnshire feels that now is the time to put money to work, as the firm believes pricing is right and performance should only improve.”We have somewhat unusual deal flow,” said Bagin, explaining how his firm has managed to remain busy over the course of the last year. “We have several people in the firm who do nothing but source deals for us. So we really don’t rely [exclusively] on outside brokers or bankers to bring us deals.
NexCycle has three business lines: recycling systems, which includes a network of recycling centers in California and Maine that collect and process empty beverage containers returned by consumers; plastic reprocessing through two facilities that wash, grind, extrude, blend and palletize scrap plastic resins; and glass reprocessing. NexCycle operated three facilities for the latter that process glass scrap and convert it into furnace-ready glass cullet. The cullet is then sold as a raw material for the production of glass bottles, fiberglass and other products.
“We are looking to expand the California operation in post-consumer beverage containers, and also in the industrial plastic waste, which is primarily located in Canada, in Toronto and Alberta,” said Bagin.
He added there are plenty of strategic investors, large recycling companies or waste management that may provide an exit strategy for NexCycle. Or, said Bagin, a financial investor would also be appropriate.
The firm’s IRR on a net basis is 60%. In June, the firm acquired Transworld Signs Inc., an add-on to its sign portfolio company Visual Products Corp., which includes Fallon Luminous Products, Gordon Sign and Signage. Collectively, theses companies’ sales are approaching $80 million. Among its customers are the U.S. Postal Service and Shell Oil.
Lincolnshire also purchased Riddell Sports Group Inc. in June, which has sales of $100 million and is a provider of branded athletic equipment, uniforms and practice gear for young men and women. The company is perhaps best known for its premier position in manufacturing and marketing football helmets to the National Football League (NFL).
In September, Lincolnshire acquired Computer Technology Solutions Corp. (CTS), a provider of after-sales services to major computer hardware manufacturers and system integrators. The company’s aggregate sales for 2001 will be approximately $100 million.
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