Mason Wells Joins Broadband Bandwagon –

Not everyone agrees on the future of broadband, but everyone, including private equity firms, agree they want in.

Last month Mason Wells and members of management bought Troncom Corp., a maker of products that support broadband telecommunications delivery.

Mason Wells Managing Director John Riley declined to disclose terms of the deal, but said the Troncom deal was consistent with his firm’s overall investment strategy of putting down $10 million to $20 million in equity per deal in companies with revenues of $150 million or higher.

M&I Marshall & Ilsley Bank, which is the largest investor in the firm’s Mason Wells Buyout Fund I, provided the debt financing for the Troncom transaction. Riley said it was capitalized very conservatively with about 75% equity in anticipation of a platform strategy.

“Troncom has an excellent management team, and we like the telecommunications industry,” Riley said.

Founded in 1992, Troncom designs, manufacturers and markets access and transmission products used in broadband telecommunications. Its local loop provisioning products are used by telephone companies to provide voice and data services over telephone networks.

Don Mulder, Brad Ketch and other Troncom executives led the deal. Riley said Troncom’s management will remain in place with the exception of Mulder who will serve as chief executive and Ketch who will hold the title of vice president of business development. Riley said Mulder, a telecom veteran, formerly worked for US Robotics, which is now part of 3Com Corp.

Riley said Troncom’s proximity to Chicago’s telecom hub was also desirable. Based in Batavia, Ill., the company is near major telecommunications companies, including Motorola Inc., Bell Labs, and Westell Inc. Current customers include Bell Atlantic, Southwestern Bell and GTE.

Troncom will be used as a platform to build a broadband access equipment company through acquisitions and internal development, Riley said. The company, he added, will continue to focus on internal engineering and research and development as well as acquiring other “last mile” companies-those telecom companies that specialize in providing fast access to home users.

Including the Troncom acquisition, Mason Wells Buyout Fund I currently is about 39% invested. The company said it has signed commitments that will bring the total capital employed to $75 million by the end of 1999.

Other recent acquisitions include General American Corp.’s purchase of North Star Title Inc. and North Star Real Estate Services Inc. early this month. General American is Mason Wells’ bank equity and mortgage closing services platform company.-A.T.

Charterhouse Adds Home Care Business

Charterhouse Group International closed a deal in early December to buy home respiratory care company MP TotalCare Inc., which it will use as a platform company in the home health-care arena.

Thomas Dircks, a managing director at Charterhouse Group, said MP TotalCare has annual revenue of approximately $25 million. Dircks declined to disclose the bank involved in the debt financing, but said the deal structure was comprised of 50% senior debt.

The remainder of the capital for the deal came from the firm’s Charterhouse Equity Partners III Fund, which Dircks said is about 45% invested, and MP TotalCare management, which provided approximately 10% of the equity portion.

Tampa, Fla.-based MP TotalCare provides mail delivery of prescriptions and equipment used by patients with chronic respiratory conditions diseases like chronic bronchitis and emphysema. The company has a call center to help patients comply with their health-care regimens.

Dircks said Charterhouse had been looking at home health care for a number of years. Howard Deutsche, former executive at Lincare Holdings Inc., a home health-care provider, brought MP TotalCare to the firm’s attention. Deutsche will serve as chairman of MP TotalCare and Pawlowski will remain as chief executive and president of the company.

“It’s a very profitable company and fits the model that has been successful for Charterhouse,” Dircks said. “It’s a strong entrepreneur in a growing market.”

He said the market for home respiratory care is projected to rise 10% annually over the next five years, and he expects MP TotalCare to grow at least as quickly.

“Chronic problems are lasting longer,” Dircks said. “Unfortunately, that’s where the whole health-care world is headed.”

Dircks said the company has started providing services to diabetes patients and plans to offer services in other chronic diseases. He said he expects MP TotalCare to be offering services in additional disease areas by the later part of 2000.

Internal growth is expected to come from sales to retail pharmacies, medical equipment companies and alliances with companies in the chronic disease market. The company also has plans to build a Web site and use e-commerce as a distribution channel by the end of next year.

Earlier Deals Provide Foothold

Dircks said Charterhouse Group’s experience with two recent health-care service investments that have successful online components give the firm the general Internet knowledge to help roll out Web-based commerce for MP TotalCare.

This summer Charterhouse Group bought Cross Country Staffing, a medical staffing company and invested heavily in a start-up platform, Dermatology Partners Inc., which targets dermatologists’ practices.

Dircks added the firm expects to close on its merger of Travcorps, which has approximately $100 million in annual revenue, with Cross Country Staffing around Dec. 16. Dircks said the merger with Travcorps would make the combined company the largest nursing staff provider in the country.-A.T.

Waud Exits Chemicals Through Sale to AEA

Waud Capital Partners LLC last month exited from its investment in Sovereign Specialty Chemicals Inc., selling a majority of its stake in the industrial sealant maker to private equity veteran AEA Investors Inc..

The Lake Forest, Ill.-based firm sold 75% of Sovereign to AEA. The remaining 25% will continue to be owned by Waud Capital and other institutional and individual investors, including management. Terms of the deal were not disclosed.

Waud Capital’s founder Reeve Waud said AEA was attracted to Sovereign because it had previous experience investing in specialty chemicals businesses. “They wanted to take it to the next level,” Waud said.

Sovereign manufactures and markets adhesives, sealants and coatings for industrial and consumer applications. The Chicago-based company was founded in 1996 by Sovereign Specialty Chemicals, L.P., a venture that included Waud and investor Robert Covalt, former president of Morton International’s specialty chemicals group.

Waud said Sovereign was started with Covalt as its chief executive. Covalt, who will stay on with Sovereign, had increased Morton’s specialty chemical division through 12 acquisitions, bringing the company’s annual revenue to $1.3 billion, Waud said. Under Covalt’s management Sovereign’s revenues have grown to $250 million annually by internal growth and six acquisitions over three years.

In April of this year, Waud Capital held a final closing on the firm’s debut buyout fund, Waud Capital Partners, L.P., after rounding up a total of $100 million.

The fund has since grown to $115 million, with additional commitments from the five members of the firm.