Signs Of Rebound At Wounded Willis Stein

Target: Assets from Material Sciences Corp.

Price: $10 million

Sponsor: Willis Stein & Partners

Seller: Material Sciences Corp.

Financial Adviser: Seller: Houlihan Lokey

Legal Adviser: Sponsor: Kirkland & Ellis LLP; Seller: Katten Muchin Rosenman LLP

Willis Stein & Partners has sprung to life in the last few months and may be inching closer to finally raising its fourth fund.

The firm didn’t make any platform acquisitions or sell any companies in 2008 and most of 2009, according to Capital IQ. But on April 12, it announced it had cut a $10 million equity check so its portfolio company Roll Coater Inc., an Indianapolis-based provider of coil coating services to steel mills, could buy assets and equipment from a plant owned by Material Sciences Corp. in Elk Grove Village, Ill. In December, the firm invested an additional $20 million into its portfolio company CompuPay Inc., which provides payroll processing services. And in November, the firm tapped its portfolio company Roundy’s, the Midwestern supermarket chain, for a $75 million dividend recapitalization.

Executives believe there will be more opportunities to generate returns in the near future, whether by full exits for dividend recaps. “I think we see a path toward significantly increasing liquidity over the next 12 to 18 months,” Chris Boehm, a managing director at Willis Stein, told Buyouts. Boehm declined to discuss what portfolio companies might be primed for an exit.

In recent years, investors have begun questioning whether the Chicago-based buyout shop would be able to raise a follow-up vehicle to its third fund. The $1.8 billion fund, raised in 2001, took a $345 million loss on technology magazine publisher Ziff Davis, which filed for bankruptcy potential in March 2008, and several executives have left the firm in recent years. But Boehm said executives remain positive. “We’re very upbeat about the portfolio,” he said. He also said executives “have every intention of raising Fund IV.” Boehm declined to discuss returns on Fund III or when the firm might start raising a successor.

Willis Stein has owned a number of companies for several years that it might look to exit, including CompuPay, which has made five add-on acquisitions since Willis Stein bought the company in 2004, according to Capital IQ; Education Corporation of America, the operator of a private, for-profit school called Virginia College that Willis Stein has owned since 2005; Strategic Materials Inc., a Houston-based processor of glass and plastic products for glass manufacturers that the firm bought in 2005 and has since made one add-on acquisition to; and Roll Coater, which Willis Stein bought in 2004 for $162.5 million, according to Capital IQ. Roll Coater’s services include the application of paint and other protective treatments to steel, aluminum and stainless coils.