Case
study Prof. Ian Giddy, New York University qIn
a deal that closed in 2005, Brockway Moran & Partners purchased
Woodstream Corp., a maker of wild animal cage traps, rodent control
devices and pesticides, from Friend Skoler & Co. LLC. The $100
million purchase price is equivalent to between 6.5 and 7x EBITDA.
qOf
the equity, Brockway contributed 85% of the total, with management
chipping in 10%. Lenders Antares Capital Corp. and Allied Capital Corp.
fill in the remaining 5%
gap. Total equity represents approximately 40% of the purchase price.
The equity sponsors aim for a 27% rate of return in this investment.
qOn
the debt side, Antares led a $58 million senior facility, along with
Merrill Lynch and GE Capital Corp. The senior debt component also
contains a revolver to be used in the future as working capital (and
not included in the $100 million purchase price). CIT Private Equity
and Denali Advisors LLC provided a subordinated note in the amount of $17 million.
A summary of the financing terms follows:
Questions 1. What is the effective rate of return to the mezzanine investor? 2. What is the effective cost of the mezzanine finance to Woodstream? |