Sun Plucks ACT From Chapter 11 –

Boca Raton, Fla.-based turnaround specialist Sun Capital Partners was the winning bidder for the U.S. assets of ACT Manufacturing in a deal valued at $6.6 million (with an adjustment being determined). The transaction was made through its second fund, which Sun Capital closed in May 2001 on $200 million.

Sun is conducting the transaction through its Sun ACT Acquisition Corp. vehicle. The platform will provide electronics manufacturing services to original equipment manufacturers in the networking and telecommunications, high-end computer and industrial and medical equipment sectors.

Steven Liff, vice president of Sun Capital, said his firm became “very interested” in the U.S. assets of ACT a few months ago after the company decided to divide them from their better-performing overseas operations.

“The foreign operations are much more healthy than the U.S. operations, and we obviously look at distressed situations,” he said. “It turns out the [original] auction did not go as well as planned, and prices came down and there were some ideas of splitting the U.S. and overseas businesses. And that’s when we became very interested.”

He went on to explain that there wasn’t much interest in the U.S. business. “This is a company that was once very large, has shrunk due to the economy and the segments of the economy that it serves, technology and telecom. However, it still has a pretty good niche of low-volume, high-margin contract manufacturing,” he said.

After filing for Chapter 11 bankruptcy protection earlier this year, ACT hired investment bank Lazard Freres to manage the sale of the company.

As for Sun Capital, it is purchasing the assets only, “and riffing the company of all liabilities,” said Liff. Because Sun Capital is getting an attractive purchase price, he said, and can through its expertise downsize the organization so that expenses match revenue, he believes that once the company is out of bankruptcy Sun Capital will be able to “re-grow the [company’s] top line. It has some large customers that have been loyal.”

At the same time, the entire market has been in disarray, he said. Therefore, there’s going to be a lot of consolidation in the PCB contract manufacturing market.

“This is one of the first companies going through this process. That was the bad news for ACT. The good news is, they’re the first ones who are going to come out of it clean,” Liff said.

The ACT transaction brings to 16 the number of deals the firm has completed in the past 12 months. In June, Sun Capital agreed to purchase the assets of day-care chain Tutor Time for approximately $30 million. In May, Sun acquired the assets of bankrupt Nationwide Warehouse & Storage. In April, the firm acquired the image products business of U.K. consumer packaging company Rexam for GBP42 million ($60 million); third-party administrator Benadco through its HealthPlan Holdings portfolio company for an undisclosed sum; the assets of bankrupt industrial products manufacturer Carbide/Graphite Group for $50 million; and BMK, a distributor of merchandise to supermarkets and drugstores, for $55 million in cash plus the assumption of certain obligations.