Poof! Company Vanishes From Harvest Portfolio

Target: U.S. Silica

Price: $300 million

Seller: Harvest Partners

Sponsor: Harbinger Capital Partners

Legal Counsel: Seller: White & Case; Buyer: Paul, Weiss, Rifkind, Wharton & Garrison

Exit Multiple: 2x

It will have to go down as one of the quickest buyout investments on record.

Four weeks after closing a $200 million deal to buy materials company U.S. Silica, New York buyout firm Harvest Partners reached an agreement to sell the business for more than twice its invested capital. Late last month, Harvest Partners closed its nearly $300 million sale of U.S. Silica to Harbinger Capital Partners, a New York hedge fund and special situations investor, bringing the total hold period to just shy of seven weeks. “Management was as surprised as we were about Harbinger’s offer,” said Michael DeFlorio, a partner at Harvest Partners, who shepherded the deal along with Michael Cardito and Tanvi Desai.

Remarkably, the holding period might have been even quicker. Harbinger Capital approached Harvest Partners about buying U.S. Silica in July, a month before Harvest Partners had closed on the deal, DeFlorio said. The whiplash deal-making comes on the heels of an 11-year investment in the company by CCMP Capital Advisors, the former buyout arm of JP Morgan Chase & Co., and caught U.S. Silica’s leadership off-guard.

U.S. Silica, based in Berkeley Springs, W.Va., first went on the block at the beginning of the year through an auction run by Wachovia Capital Markets. The auction broke down, however, in part because the company remains a target of more than 1,000 lawsuits from people alleging that inhaled sand led to cases of silicosis, a lung disease. At one time there were 17,000 silicosis cases lodged against the company, according to the North Valley Business Journal, a local newspaper.

Harbinger Capital reportedly took part in the auction and, after losing out to Harvest Partners, returned in the summer to try again. At the time, Harbinger Capital, which declined to comment for this article, was making a hostile bid for Oglebay Norton Co., a Cleveland-based materials company that’s a natural strategic match for U.S. Silica, according to a person familiar with the proceedings.

When Harbinger Capital approached Harvest Partners about selling U.S. Silica, it appeared as though Harbinger Capital’s play for Oglebay Norton would succeed. After agreeing to buy U.S. Silica, however, a strategic bidder, Carmeuse North America, swooped in with an offer that beat Harbinger Capital’s price and won approval from Oglebay’s shareholders.

Carmeuse may want to give Harbinger Capital a call.—J.H.