Banking & Finance, Human Resources, and Manufacturing

Private equity firms inject capital into Hilco

September 16, 2012
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Hilco Plastics Holdings LLC, a privately held custom manufacturer of injection-molded components with two of its factories in Grand Rapids, recently sealed the deal on a private equity recapitalization that will enable the company’s president/CEO to retire, widen the responsibilities of existing management and potentially add new jobs and equipment.

“This is a very strong, very profitable business,” said Matthew Miller, managing director of BlueWater Partners LLC of Grand Rapids, which served as the financial advisor to Hilco and helped the company secure two out-of-state investors.

“The control shareholder wants to retire,” added Miller, who declined to identify the owner. “He is the president/CEO of the company and also wants to sell his stock in the company. So the transaction allowed him to sell all his stock. He will retire in roughly a year and a half, as is typical in a private-equity-sponsored transaction.”

Two private equity firms, White Wolf of New York, founded in 2011, and Massachusetts-based Gemini, are now the controlled shareholders of Hilco, for an undisclosed sum. White Wolf invests in companies operating in a variety of industries with $10 million to $100 million in revenues and earnings before interest, taxes, depreciation and amortization of at least $1 million.

Established in 1993, Gemini provides capital and strategic resources to lower-middle-market companies. It has invested approximately $500 million in more than 90 companies throughout the U.S., typically investing $3 million to $8 million per transaction in either control or minority positions. Gemini’s target portfolio companies have revenues of $10 million to $50 million and, like White Wolf, an EBITDA of at least $1 million.

“They have a network of contacts that may be beneficial to the company (Hilco), financial and management expertise,” said Miller. “In this case, Gemini will provide less operational expertise than some other equity groups. There’s no need to make any significant changes.”

Miller said White Wolf and Gemini were drawn to Hilco in part because of its strong performance during the height of the Great Recession.

“It starts with people and a management team and the company’s strong performance, especially through the Great Recession,” Miller said. “And that includes profitability as well as the company’s balance sheet, which got stronger during the recession, actually. And beyond that, I would say the company’s expertise in plastics and also its technical expertise.

“In addition, Hilco does contain some rather unique capabilities processes.”

Founded in 1947, Hilco is a custom manufacturer of products that contain injection-molded components for industries that include automotive, medical, furniture and marine, and operates three manufacturing facilities in Michigan, two of which are in Grand Rapids with the other in Armada Township just north of Detroit.

Hilco also utilizes a gas-assisted molding process as well as secondary operations such as assembly, sonic welding, robotic insert molding, and robotically applied UV-cured abrasion hard coating to protect part surfaces.

Although not the focus when the two equity firms closed, Miller said it’s not unlikely new hires and new equipment are in Hilco’s future, though he could not project specifics.

“It’s not something that happened at the closing,” said Miller. “However, private equity groups are all about growth and value creation, so what they are doing is investing in a company, helping them leverage the company’s solid operating history and achieve significant growth potential.

“The focus will be on growth and profitably — and yes, over time, that implies jobs will be added and new equipment will be purchased, but again, the purpose of the transaction was not to provide capital, per se, to purchase new equipment.”

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