Main Street Flows With New Deals –

Main Street Resources, formerly Colt Capital, has been busy on the acquisition front of late, purchasing Disc Graphics in a privatization deal in September and picking up H.W. Baker Linen in an add-on acquisition for its Best Manufacturing Group portfolio company.

Disc Graphics is a diversified manufacturer and printer of specialty packaging, focusing specifically on the home video, pharmaceutical, music publishing and cosmetic markets. H.W. Baker Linen, meanwhile, supplies textiles, amenities and guest room supplies to the hospitality industry, and represents a snug fit with Best, which was originally acquired by Main Street in June 2001. The Baker Linen acquisition closed at the end of the September, and Main Street expects to complete the Disc deal by late November.

Main Street used its $65 million SBIC fund for the acquisitions and, even with the two deals, the fund still has more than 80% of the original capital remaining. Disc Graphics joins Best, Pawtucket Fasteners and Sage Parts in the fund, sharing with them a common trait as a mid-sized company located in the Northeast.

In the Disc Graphics deal, Main Street and company management agreed to pay $1.82 a share in cash for each share of Disc stock. The purchase price represents a 75% increase over the closing price of the stock a day prior to the deal’s announcement, and based on the company’s tally of 5,533,402 total shares as of June 30, the purchase price values Disc Graphics at just over $10 million. For the first half of 2002, Disc Graphics saw its revenues decline by 12% from the comparable period a year ago to $23.1 million. However, its net income swung to a profit of $107,000 from a loss of $1.6 million during that time.

Meanwhile, the addition of H.W. Baker Linen to Best Manufacturing gives the combined company the largest geographic coverage and strongest distribution capabilities in the textile and apparel rental industry in the U.S. Best will merge Baker with its hospitality business unit, which will leverage the broad hospitality textile and amenity product lines of Baker with the napery, garment and manufacturing capabilities of Best.

In moving on these deals, Main Street Founder Dan Levinson cited the firm’s overall approach in working closely with its limited partners to uncover, research and run the companies it acquires. The firm’s investors are primarily owners and executives of mid-sized companies, and through their experience and contacts Main Street gets access to proprietary deal flow, high-level investment decisions, and in-depth due diligence, according to Levinson.

Levinson notes that Donald Sinkin and Margaret Krumholz, Main Street investors and CEO and CFO of Disc Graphics, respectively, were both influential in Main Street’s privatization of the company. He credits Tim Healey, an LP in Main Street’s SBIC fund and Best board member, as setting that deal in motion in 2001. In finding management for Best, Main Street installed Scott Korman, who is also a Main Street investor and former president of Welsh Farms, as the company’s CEO at the completion of that deal.

Westport, Conn.-based Main Street typically commits between $2 million and $10 million of equity capital in its investments, which encompass acquisitions, growth capital fundings, equity financings and select startups and turnarounds. Regarding the smaller deals Main Street focuses on, Levinson states, “We are purposely staying under the Wall Street, or institutional, screen, as it allows us to stay proprietary in our deal flow.” Levinson also notes the firm donates a minimum of 20% of its earnings to charitable causes through the Main Street Charitable Foundation.