After a slightly more than two-year holding period, Wellspring Capital Management agreed to sell vending machine platform ACMI Holdings. Publicly held Coinstar Inc. is on the buying end of the transaction, which is valued at $235 million and is expected to close by mid July.
The sale will generate a return of more than 2x Wellspring’s equity. The firm used its 1998-vintage, $285 million Wellspring Capital Partners II fund for the investment.
“Fund II is fully invested at this point, and ACMI was growing at a fast enough clip where there wasn’t enough capital available [from the fund] to fully support the company’s growth,” Wellspring Partner William Dawson said.
The sale of ACMI represents Wellspring’s second realization from Fund II, and shadows the 2002 sale of diaper manufacturer Paragon Trade Brands to Tyco International. The firm was able to achieve a return of 4.5x its equity from its investment in Paragon, which saw its valuation expand from $115 million to $732 million during the two-plus years Wellspring held onto the company.
ACMI is best known for its skill cranes found in stores such as Wal-Mart or Kroger’s. The company was taken private by Wellspring in a 2002 deal, valued at $125 million. Wellspring was able to grab an 80% stake in the business through the transaction.
During its holding period, Wellspring made five add-on acquisitions to the platform, and in all, contributed roughly $40 million of equity to the investment. The most notable deal was ACMI’s purchase of Folz Vending, the largest U.S. operator of bulk vending machines at the time of the purchase.
To help further grow the business, Wellspring bolstered the existing Randy Fagundo-led management team. The firm also oversaw upgrades to the company’s technology and the move of ACMI’s distribution center from Washington State to China.
“Probably the most important thing we did,” Dawson said, “was to beef up the sales and marketing team… The company was a national brand when we bought them. Now ACMI has a significant presence in China, Mexico and Puerto Rico.”
In just two fiscal years, from 2001 to 2003, ACMI was able to boost its pro forma sales from $141.9 million to $214.8 million. The company operates roughly 28,000 vending machines and around 140,000 gumball and toy-dispensing instruments.
Since raising its third fund, the $675 million Wellspring Capital Partners III LP, in April of last year, the firm has been busy accumulating new investments. Most recently, Wellspring has completed buyouts of golf equipment retailer Edwin Watts Golf, aluminum product maker JW Aluminum and plumbing services provider Residential Services Group.