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In Feb-01 Heartland Industrial Partners (‘Heartland’) purchased 27m shares of the common stock of U.S. Collins & Aikman Corp. (‘Collins & Aikman’) for US$135m from The Blackstone Group and Wasserstein Perella Partners (reducing their holding by half). At the same time it purchased 25m newly issued shares of common stock from the company itself. This US$260m aggregate investment gave Heartland a stake of approximately 59.7% in the common stock of Collins & Aikman. This transaction valued the common equity at US$435m. Including US$742m in pro forma (net of US$125m equity issue) net debt at 31-Dec-00 the enterprise value of the transaction amounted to US$1.18bn. This implied the following multiples: 62% of sales for 2000 (US$1.9bn, 3.5x net tangible capital turn), 6.7x EBITDA for 2000 (US$175m, 9.2% margin), and 10.3x EBITA for 2000 (US$115m, 6.1% margin), and 2.2x net tangible capital employed (US$536m).
As a sidenote we would like to point out that Heartland Industrial Partners was founded by David A. Stockman, a former senior managing director at The Blackstone Group. There Mr Stockman was responsible for investments in industrial companies, including Collins & Aikman Corp, Bar Technologies, Inc., American Axle & Manufacturing, Inc, Clark USA, Inc. (now Premcor), Haynes International, Inc., Haynes Holdings, Inc., Imperial Home Decor Group Inc., Republic Engineered Steels, Inc., and RES Holding Corporation.

In late 1999 Carlyle agreed to buy a 26% stake in the German spark plug specialist BERU AG (‘BERU’) at €30 per share from a group of family shareholders.

This implied an equity valuation of €300m. BERU carried a net cash position of €65m and had €15m of non-operating financial fixed assets bringing enterprise value down to €220m.

This implied the following multiples: 88% of sales for 1999/2000 (€248m), 3.1 times EBITDA for 1999/2000 (€72m, 29% margin) and 3.8 times EBITA for 1999/2000 (€58m, 23.4% margin).

BERU management qualified the intended public offer at €30 a share by Carlyle planned for Feb-00 as too low and initiated a share buy-back program. In Feb-04 Carlyle held 37.1% of Beru’s share capital.

Post script: In Nov-04 U.S. automotive company BorgWarner Inc. announced it had signed a share purchase agreement for 62.21% from major shareholders and a share purchase option agreement for 0.82% of the outstanding shares in BERU. Under the terms of the agreement Carlyle and the family shareholders would receive €59 per share. In addition it announced its decision to make a voluntary public tender offer for the remaining shares for a price of € 67.50 per share. This valued the equity at €621m. Adjusted for BERU’s €80m net cash position and €5.9m in financial fixed assets at 30-Jun-04 this valued the business at approximately €535m. This implied the following multiples for the 12 months ended 30-Jun-04: 144% of sales (€370.6m), 6.5x EBITDA (€82.9m, 22.4% margin), 9.1x EBITA (€58.8m, 15.9% margin) and 2.2x tangible capital employed (€243m).

In Oct-97 The Blackstone Group (‘Blackstone’) acquired 63.9% of the common stock of U.S. auto parts manufacturer American Axle & Manufacturing Holdings, Inc. (‘AXL’) in a US$474m recapitalization that valued the equity at US$112m (US$2.85 per share). Including US$490m in net debt at 31-Dec-98 the enterprise value amounted to US$602m.
This implied the following multiples: 28% of sales for 1997 (US$2.15bn, 4.0x net tangible capital turn), 3.9x EBITDA for 1997 (US$153m, 7.7% margin), 5.2x EBITA for 1997 (US$116m, 5.4% margin).
In Feb-99 AXL was floated on the NYSE at US$17 per share valuing the equity at US$671m and US$1.24bn including US$570m in net debt (61% of sales for 1998, 10.4x EBITDA for 1998).
In subsequent secondary offerings (Aug-01, Mar-02, Oct-03 and Dec-03) Blackstone sold all of its AXL shares at an average price of US$28.50 realizing a multiple of exactly 10x its original cost. In the latest two offerings (Oct-03 and Dec-03) Blackstone sold half its original stake in AXL common stock for a total of US$461m valuing the equity at US$1.8bn and implying an enterprise value of US$2.23bn including US$437m in net debt at 31-Dec-03.
This implied the following multiples: 61% of sales for 2003 (US$3.68bn, 2.3x net tangible capital turn), 4.3x LTM EBITDA 2003 (US$514m, 23.0% margin), 6.1x EBITA for 2003 (US$346m, 9.4% margin).