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The Thermo Companies have
made two investments in the industrial sector. The first supported a management
team in acquiring a platform company. This company, United Engines,
subsequently made additional acquisitions and investments to broaden its
products and services and to help fuel its growth. The second investment was
made into a mezzanine debt fund and was done for strategic reasons, including
the right to make additional direct investments in the respective portfolio
companies. This approach permits Thermo to evaluate multiple opportunities in
situations where the mezzanine fund has already conducted due diligence in both
the company and the sector. Thermo is committed to providing additional growth
capital as necessary to its companies and is actively working with the
respective management teams on strategic growth opportunities.
- United Engines LLC. In 2001, Thermo and a senior management team made
a $10 million investment to purchase two related companies, United Engines and
UE Manufacturing (collectively "United"
www.unitedengines.com),
in the diesel engine distribution and power transmission businesses. United
sells engineered equipment, parts and service to numerous markets including
transportation, drilling, power generation, and oil field services. Combined
revenues for 2001 were $50 million and grew to approximately $250 million by
2007. Thermo has a 20-year working history with this management team spanning
multiple business ventures.
United expanded into related businesses
that added value to the existing distribution and service network through cost
efficiencies and additional equipment and service offerings. In 2002 the United
management team launched UE Compression to focus on the natural gas compression
marketplace and leverage its experience and reputation in the oil and gas
industry. To do this, United recruited the past president of a competitor whose
division was being eliminated, who became responsible for manufacturing new
equipment as well as providing parts and service to the compression industry
for United.
In 2004 United acquired Buck's Engine Company which
assembles and sells up to 3,000 engines per year into the agricultural
irrigation market. This acquisition provides access to a unique contract
between General Motors Corporation and Buck's allowing the purchase of
automotive style engines at a price not offered to more than a small handful of
companies in the United States. Buck's then converts these gasoline engines to
operate on propane, butane or natural gas fuels.
Also in 2004, United
obtained the territorial distribution and service rights to the Thermo King (www.thermoking.com) line of
temperature control systems for Texas. Thermo King's equipment is used in
mobile applications including trailers, buses, shipboard containers and railway
cars. Thermo King has been in business since 1938, is the preeminent name in
this field, and operates through a global network of dealers in 75 countries.
United, with the existing Thermo King operating management, purchased the
assets and distribution rights for Texas from a company which was exiting the
business. First year revenues were in excess of $10 million and were
immediately accretive to earnings at United. Management believes there are
additional opportunities to acquire Thermo King distributors in other
geographic areas.
- Prudential Capital Partners, L.P. ("PCP"). PCP is a $600 million
mezzanine fund with exclusive access to Prudential Capital Group's mezzanine
deal network. The fund is focused on the middle market with a preference for
manufacturing and service companies and has a fundamental value orientation
which stands to benefit from the disruptions in the high yield bond market.
Public high yield investors are demanding increased liquidity in their
investments resulting in increased offering sizes which often preclude smaller,
high quality companies from accessing junior debt capital. PCP has access to
many of these companies through its proprietary network and believes the
investment opportunities are both attractive and abundant. Thermo's long-term
relationship with Prudential, which began in 1989 with financings in Thermo's
independent energy business segment, its common investment strategy and its
investment in PCP, will provide it with attractive investment opportunities.
Thermo is currently evaluating direct investments in certain PCP portfolio
companies.
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