New Shop Delves Into Energy Sector With Fourth Deal

Industrial Opportunity Partners LLC made its first foray into the energy sector recently, sponsoring a recapitalization of Gulf Coast Machine & Supply Co. The firm had been eyeing the Beaumont, Texas-based company for about a year, hoping to capitalize on the industrywide scramble to find new sources of oil and gas.

Industrial Opportunity Partners, the Evanston, Ill.-based firm that closed its debut $185 million fund last year, seeks to makes equity investments of $5 million to $25 million. The firm did not disclose the terms of this deal. But PNC Business Credit and Monroe Capital, a Chicago-based mid-market lender, disclosed that they provided senior debt of $21 million and $23.5 million, respectively.

, senior managing director at Industrial Opportunity Partners, said it was difficult to secure financing in the current environment, especially because lenders are hesitant to commit to companies in cyclical industries such as energy. The firm approached 15 to 20 debt providers in all before finding willing lenders, he said. “It’s not the easiest environment to raise financing,” Tallering said.

Gulf Coast Machine & Supply manufactures large forgings for use in the oil and gas, petrochemical and wind energy markets. Its products are in demand from the expanding exploration for oil and gas, Tallering said. Gulf Coast Machine & Supply does much of its business in the Gulf Coast region, where oil and gas companies are increasingly searching for fossil-fuel deposits.

Industrial Opportunity Partners acquired the company through an auction run by Mills & Stowell Investment Bankers, a Houston-based financial advisory firm. Tallering said the firm had to develop relationships with the selling owners, Tommy LeBlanc, the company’s CEO, and his son, David LeBlanc. The deal allows the LeBlancs to cash out some of their ownership stakes while maintaining a minority interest, Tallering said. Tommy LeBlanc declined to comment. The LeBlancs will continue to manage the company.

The firm is now turning the company toward investing in a new forging press, furnaces and other equipment to increase capacity and enable Gulf Coast Machine & Supply to accommodate increasing demand for the sturdy oil pipeline and refinery parts it helps create.

Gulf Coast Machine & Supply marks Industrial Opportunity Partners’s fourth acquisition. In April 2006, the firm completed its first deal with The Algoma Group Inc., a manufacturer of wood doors for commercial construction. It followed that up in December 2006, with the acquisition of Center Manufacturing Inc., which makes complex welded tubular assemblies for motorcycles, all-terrain vehicles and other automotive uses. In February, it acquired FAS Controls Inc., a company that makes pressure switches, valves and circuit breakers for heavy trucks and commercial equipment.

Tallering and Founding Principal Adam Gottlieb were previously at TMB Industries, a Chicago-based buyout shop focused on middle-market industrial companies. Robert Vedra, the other founding principal, was previously at Wynnchurch Capital Ltd.—B.V.