Target: JW Aluminum Holding Co.
Purchase Price: $310M
Buyer: Wellspring Capital Management
Seller: Superior Plus Income Fund
Financial Advisor: Seller: RBC Capital Markets, TD Securities
Legal Counsel: Buyer: Morgan Lewis & Bockius LLP
Accountant: Buyer: Alvarez and Marsal
It’s not often that a private equity firm gets to own the same company twice, but it does happen. Witness
The company was boomeranged courtesy of Canada-based Superior Plus Income Fund, which acquired the aluminum products maker from Wellspring in late 2005 and is now selling it as a part of its plan to reduce its overall debt load and focus more on its Canada-based businesses. To facilitate the acquisition, Wellspring utilized an asset-backed loan and second-lien notes, both provided by UBS.
JW Aluminum manufactures specialty, flat-rolled aluminum products that are used in the heating, ventilation and air conditioning; building and construction; and flexible packaging markets in the U.S. The Mount Holly, S.C.-based company generates EBITDA of about $50 million out of approximately $500 million in revenues, a source close to the company tells Buyouts.
Wellspring’s story with JW Aluminum began with a corporate carveout in Dec. 2003, when the firm acquired the aluminum products maker from Walter Industries Inc., homebuilder and financier, for $125 million. Wellspring tapped equity from its $640 million, vintage-2003
To grow the company, Wellspring acquired two foil rolling plants from aluminum producer Alcoa Inc. and bolted them onto the JW Aluminum platform. The two plants, one in St. Louis, Mo., the other in Russellville, Ark., allowed the company to penetrate niche areas including the flexible packaging and pharmaceutical markets.
“We took it from being a one-plant operation to a three-plant operation, and EBITDA grew substantially as a result,” says William Dawson, a partner at Wellspring Capital. “We continued surveying the playing field and saw plenty more opportunities [to grow the company by add-on], but at the time we didn’t have enough capital to see them through, so we sold it instead.”
Wellspring sold JW Aluminum in late 2005 to Calgary, Canada-based Superior Plus Income Fund for $350 million. UBS Investment Bank ran the auction. While JW Aluminum was under Superior Plus’s stewardship, the housing market softened and energy prices tightened—a bad combination for a company that considers the housing industry a major end-market and relies heavily on natural gas for its manufacturing processes.
That Wellspring tapped turnaround advisory firm Alvarez & Marsal to assist it in the transaction—and was able to reacquire the company for $40 million less than it was sold for—leads to the conclusion that JW Aluminum might have some hair on it. Dawson, however, would not confirm this, noting only that the price paid for the company “is the result of an auction process.”
Once the company is back under Wellspring’s control (expected some time in December), it will be a portfolio company in the firm’s $1 billion fourth fund,
Reacquiring companies in the buyout arena is rare, but Wellspring is not the first firm to do it. Last October, buyout shops
Despite the fact that Carlyle sold Panolam for less than it bought it for, that Washington D.C.-based firm was still able to profit from the company due partly to a $225 million refinancing in 2004 that reportedly allowed it to extract an estimated $70 million dividend.
It is unclear whether Superior Plus Income Fund lost money on its sale of JW Aluminum to Wellspring Capital. Calls to Superior Plus were not returned.
In a prepared statement announcing the sale, Superior Plus Chairman and CEO Grant Billing said the proceeds from the divestiture of JW Aluminum will lower Superior’s senior debt to 1.8x EBITDA and reduce its total debt level to 3.3x EBITDA as at September 30, 2006, on a pro-forma basis.—A.N.