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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" http://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 (http://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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