Known for shying away from the overcrowded venture capital syndication scene, Whitney & Co. recently rang up Moosic, Pa.-based Compression Polymers Group and offered it a capital infusion from its mezzanine investment fund. There was just one small stipulation the privately-held plastics company had to agree to: Whitney, along with fellow investor Clearview Capital, would get an 80% ownership stake in Compression Polymers and buy out the Crane Group, a private management firm that had been a majority shareholder since the early 1990s.
Compression Polymer’s management – which retains control of the company – acquiesced, and for its trouble walked away with a whopping $164 million in private equity and debt financing. The round’s equity portion weighed in at about $62.5 million, said Bill Dawson, a managing director with Whitney.
Whitney set the terms of the proprietary deal, splitting its $46 million commitment between the debt and equity portions of the round. Clearview put in $24 million, while investments from the Crane Group and Compression Polymers’ management team making up the difference.
The 20-year-old issuer hasn’t previously tapped the private equity well, but this latest infusion is more of a later-stage growth, buyout transaction because the firm bought out a large, non-management shareholder, Dawson noted. The growth-capital theme is common throughout Whitney’s portfolio, hence Compression Polymers was a good fit with the firm’s overall strategy, he added.
Who’s Running The Show?
What’s even more intriguing is that Whitney actually officially announced the deal last week and, despite repeated attempts to contact Compression Polymers, no one at the company answered the phone. Dawson said that the company had declined to comment on the deal because it was concerned that its employees and customers would become alarmed about the ownership changing hands. As far as he’s concerned, business will go on as usual at the company.
“They’ve positioned us just as financial investors,” he said. “I think they view us as guys that can help them think strategically to grow the business and help them on the exit. If an IPO is a reasonable exit, for example, we can certainly help them do that.”
When asked about Whitney’s exit plans, Dawson said the firm will likely take the company public or sell it within the next five years. In the meantime, it will work with Compression Polymers to keep up the more than 15% per year organic growth rate it has recorded since the early 1990s. To date, the company posts about $100 million in annual revenue, and Dawson said he hoped to pump that up to $200 million in the next three to five years.
It shouldn’t be too difficult. A manufacturer of plastic substitutes for metal-based products like restroom partitions and school lockers, Compression Polymers serves a stable, fairly predictable clientele that includes potential repeat customers such as educational, government and military institutions.
The company’s plastics substitutes are an attractive alternative to traditional metal products because they don’t rust or dent and are easily rid of graffiti, Dawson explained.
Futhermore, 18 months ago the company also introduced a rot-resistant, wood home-siding substitute called TrimTec that could conceivably steal a large market share away from the woodworking industry, Dawson said.
“TrimTec is a recession-resistant product,” he noted. “It addresses a multi-billion dollar market that, even in a recession, could grow at 40% per year.”
To that end, Compression Polymers plans to use its newfound capital to continue to aggressively grow its business, particularly in the TrimTec area, Dawson said.
“If TrimTec takes off, we can see that [Compression Polymers] would be an attractive IPO,” he added.