by Kelly Holman Posted 03:04 EST, 5, Jun 2006
Trimaran Capital Partners LLC said Monday, June 5, it agreed to buy a majority stake in railcar wheelmaker
Standard Steel LLC from Citicorp Mezzanine Partners LP in a deal a source said was valued at about $200 million.
The Pittsburgh-based target generated more than $125 million in revenue for 2005. It is expected to post close to $150 million in sales in 2006. UBS, Bear, Stearns & Co. and Jefferies & Co. are providing senior bank debt to support Trimaran’s purchase of the company alongside Standard Steel CEO Michael Farrell and chief operating officer Tom Reinecke, both of whom are investing in the transaction.
Mark Dalton, a managing director at Trimaran, said the deal is rooted in the New York-based firm’s experience with FreightCar America Inc. , which it took public in 2005. Trimaran garnered 5 times its investment in the Chicago maker of aluminum and steel rail freight cars from the initial public offering, according to Dalton.
“We had gotten to know the industry and suppliers, and when Standard was put up for auction by Bear
Stearns, we were already knowledgeable and comfortable with their business and the industry,” he said.
A 590-employee company that traces its origin back to 1795 as a forge making iron bars, Standard manufactures steel wheels and axles at its Burnham, Pa., plant. Its products are used by freight car builders, locomotive manufacturers and maintenance shops, as well as regional municipal transit agencies and railroad operators like Amtrak.
Officials at Citigroup Mezzanine, a New York investment firm, did not immediately return calls for comment.
According to Standard’s Web site, the company’s previous owners purchased it in 2002, the same year it emerged from bankruptcy.
Farrell and Reinecke will remain with Standard Steel in their current positions.
Skadden, Arps, Slate, Meagher & Flom LLP partners Eileen Nugent and Diana Lopo and associates Michael Civale and Ryan LaForce were counsel to Trimaran.
Kirkland & Ellis LLP attorney Geoffrey Levin was counsel to Standard, which relied on Bear Stearns for financial advice.
PricewaterhouseCoopers LLP partner Mike McHale served as accounting adviser to Trimaran.
“The initial growth strategy is very well defined,” said Jay Bloom, a managing partner at Trimaran. “We’re going to help the company fund a $30 million plant expansion in Burnham in 2007.”
As a result, the company’s wheel production capacity will increase by 33%, he said.
Bloom said Standard’s customer base is very stable at a time when the aging of the railroad industry’s car fleet is spurring demand.
Besides Bloom and Dalton, Trimaran’s deal team included executive director Robert Fioretti, managing director Steven Flyer and associate Daniel Gaspar.
Bloom said although Bear Stearns launched its auction around December 2005, Trimaran pre-empted the sale process before the company was widely marketed.
The transaction is expected to close later this month.
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