Riverside Heightens Investment Pace –

As many leveraged buyout firms sit quietly on the sidelines mulling over potential deals, The Riverside Company has been in the midst of a brisk investment pace, with eight done deals (four platforms and four add-ons) in 2002, and more in the pipeline.

Its recent purchase of J.C. Whitney & Co., one of the automotive industry’s largest catalog retailers and among the best-known brands for automotive parts and accessories, marks a departure for Riverside, which has stayed away from big consumer names. As is its practice, Riverside said it could not disclose terms of the acquisition. In the year ended Dec. 31, 2001, Whitney reported sales of $169 million.

Whitney, whose senior management made an equity investment in the transaction, is the largest direct mail automotive parts supplier in what is a highly fragmented industry. “That’s what we like, a fragmented market,” said Brooke W. Ablon, a partner in Riverside’s New York office. “We like little leaders that we can grow organically.”

J.C. Whitney is the 16th purchase from Riverside’s most recent fund, the $412.75 million Riverside Capital Appreciation Fund 2000 (RCAF 2000), and the firm’s 60th since its inception in 1988. RCAF 2000 is currently more than 30% invested, leaving ample capital for additional Riverside acquisitions. Riverside looks to average 10 to 15 deals per year, and its pace in 2002 is right on target.

Its ratio of platforms to add-ons this year is consistent with its history of investing. In fact, of Riverside’s 60 acquisitions, 30 have been platform companies and 30 have been add-on acquisitions spanning numerous industries through its three funds and other investment vehicles.

In reviewing J.C. Whitney as a potential acquisition, Riverside drew on expertise it had gained through the ownership of portfolio companies that compete in the catalog and automotive industries.

“From our experience, the J.C. Whitney opportunity met a number of key investment criteria,” Ablon said. “First, it is a leader with a strong brand name and 87-year history. Second, its market has been growing and is expected to continue growing at a solid pace. Third, we see many opportunities to improve the performance of the company and to build the business during our ownership through add-on acquisitions as well as organic growth. These are the ingredients that we find critical.”

J.C. Whitney was founded in 1915 in Chicago as a retailer of used automotive parts. In the 1930s, the company rolled out its first consumer automotive catalog, the seed of what was to become a 220-page catalog and a family of specialty catalogs that are now distributed monthly to millions of households annually in North America, Europe and Japan. Whitney also operates an integrated web site that is one of the most active in the automotive industry and runs a retail outlet in LaSalle, Ill.

J.C. Whitney caters to do-it-yourself as well as do-it-for-me consumers. The automotive aftermarket has enjoyed significant growth in the last decade, a trend driven by the vast scope of vehicle makes and models and an aging automotive population.

According to the Automotive Aftermarket Industry Association (AAIA), the average age of passenger cars increased from 7.8 years in 1990 to 8.4 years in 2000. During that time, vehicle maintenance costs per 100 miles driven increased from $2.10 in 1990 to $3.60 in 2000, generating demand for DIY products and DIFM repair services and creating sales opportunities for J.C. Whitney.