Vestar Soaks Up Sunrise Medical –

Vestar Capital Partners and Park Avenue Equity Partners, both New York-based private equity firms, agreed to purchase publicly traded Sunrise Medical Inc. for approximately $225 million.

Upon completion of the deal, the equity group will own approximately 80% of the company, with management retaining a 17% stake. Vestar and Park Avenue will control the board. Sunrise Medical’s stock, which at press time was trading at $9.31 per share, will be acquired at $10 per share through equity commitments from Vestar Capital Partners IV and Park Avenue Equity Partners LP. Additionally, Deutsche Banc Alex.Brown will lead the syndicated senior debt and the equity group is currently raising mezzanine debt for the transaction.

A public tender offer is expected to be launched this week.

Sunrise Medical is a manufacturer of medical equipment that caters to the country’s aging population, such as wheelchairs, walkers, nursing home beds and speech devices. Dick Chandler founded the company as a roll-up, which acted as an umbrella organization over individual businesses in the home care sector. When that strategy began to falter, the company’s stock plummeted more than $30 over four years. In January Michael Hammes took over the business and began to consider taking it private, attracting the attention of Vestar and Park Avenue.

“What we were really attracted to was management here,” said Jim Elrod, managing director at Vestar. “We thought the business was interesting, but this is a very special guy because he’s assembled a very good team. It’s a good business, but it’s a great team.”

Elrod said that Vestar also considers Sunrise to be a good investment because of trends surrounding the graying of America. “People want to be mobile as long as possible. People are living longer. So all these products . . . enable you to do that,” he said. “There’s a big macro trend behind [this company] that makes this a very interesting opportunity for us.”

The first order of business, according to Elrod, will be to rationalize the overhead of the company in order to make it more efficient. In the long term, Sunrise will shift back into acquisition mode. One area Vestar is eager to grow is a product line under the name Dynavox. Dynavox develops products focused on augmented speech intended for people who are mentally functional but need a communications device to speak.

The deal could close as early as December, however regulatory approval is still pending. –