Wind Point Rolls With Add-on For Pacific Cycle –

Wind Point Partners accessorized its Pacific Cycle portfolio investment, acquiring InSTEP, a marketer and distributor of jogging strollers and bicycle trailers, in an add-on deal that gives the company a stronger presence in the recreational product market. Wind Point plucked the company out of the Norwest Equity Partners portfolio. The deal closed March 14.

Terms of the transaction were not disclosed, although Salam Chaudhary, a principal at Wind Point, said that the deal was completely financed through Pacific Cycle’s senior debt facility from GMAC Commercial Finance.

Wind Point first started its bicycle company platform in 1998 with the recapitalization of Pacific Cycle, in which the firm made a $5.5 million equity investment. Through Pacific, Wind Point went on to acquire Brunswick Corp.’s bicycle division, Brunswick Bicycles-best known for its Mongoose and Roadmaster bike brands-in a $65 million deal in 2001. And, in a transaction that was announced later that year, Wind Point acquired the bicycle business of Schwinn/GT Corp. for $85 million.

The acquisition of InSTEP seems like a logical fit since the company already markets some of its strollers and baby trailers under the Schwinn brand. In addition to those products, InSTEP also markets a line of snowshoes, push golf carts and watercraft carriers for small boats and kayaks, and sells various home living products as well, such as massage chairs and tables and foldable recliners. Chaudhary said InSTEP has seen revenue growth of around 10% consistently in recent years.

“InSTEP was a portfolio company of Norwest, and we’ve got a pretty strong relationship with them from some of our co-investments in the past. Also, Pacific was probably one of the more obvious strategic buyers out there,” Chaudhary said. Most recently, Wind Point and Norwest teamed up on the acquisition of Penda Corp., a light truck accessory manufacturer.

Tim Kuehle, an associate at Norwest, said it was a profitable exit for his firm, noting that under Norwest’s watch, InSTEP “established its brand, beefed up the management team and more than doubled its earnings.”

Going forward, Chaudhary said Wind Point would continue to seek out additional acquisitions for Pacific, and would also look to establish the Schwinn brand at some of the smaller retailers. The company already introduced Schwinn to the mass merchants in 2002, following the Mongoose bike strategy, and today Schwinn bicycles can be found at Wal-Mart, Target and Toys R’ Us. InSTEP, meanwhile, already has a strong presence in some of the bigger retailers and sporting goods stores, including Target, Cabela’s, The Sports Authority, Gart Sports and Dick’s. Chaudhary also sees further growth coming from the introduction of new products, including different wagons and ride-on toys for children.

Pacific Founder and CEO Chris Hornung said that through this strategy, the company has posted a 250% jump in sales in the past two years. “Pacific has created an infrastructure that allows us to bring better quality products to consumers at a better price and distribute them to consumers where they shop every day.”

In integrating InSTEP into Pacific, Chaudhary said the “vast majority” of InSTEP management has been retained, although some had already been planning to retire prior to the sale.

Looking ahead, Wind Point expects to exit the Pacific investment in the next six to nine months, according to Chaudhary, and he sees a sale to either a strategic or financial buyer as the most likely route taken.

Wind Point used its Wind Point Partners III LP fund, the same fund used for the original Pacific Cycle acquisition. That fund is fully committed but not quite fully invested, and the firm is now starting to invest out of its $468 million Wind Point Partners Fund V, which closed in 2001.

Separately, in another deal for Wind Point, the firm recently closed its acquisition of AIR-serv Holding, buying the air vendor from Prometheus Partners. Wind Point and certain co-investors agreed to commit a total of $67 million in equity to complete the deal. AIR-serv is a manufacturer and route operator of coin-operated tire inflation and vehicle vacuum machines at convenience and retail gas stations in the U.S. and UK.