Inaugural Deal of the Week


Welcome to a new feature here at peHUB, even though “new” is about as self-obvious as “horrifying” when referring to a Doc Rivers coaching decision. Each Friday, I’ll select a Deal of the Week from the preceding five days. The only consistency I can promise is a total lack of it. This is subjective, not quantitative (since no PE deal can be legitimately judged until exit). So, without further ado…

We have a tie. I’ll let you, dear reader, break it by either emailing me or using the comment section below. The nominees are:

JW Aluminum
Back in 1992, I knew a guy named Steve who was a phenomenal pickpocket. On a single day, he took our friend’s wallet, keys, watch and medic-alert bracelet. Either Steve has gone to work for Wellspring Capital Management, or they’ve got a Steve of their own.

Wellspring today announced that it is buying JW Aluminum Holding Co. from Superior Plus Income Fund, in a leveraged buyout worth approximately $310 million. Probably a fair price, except that Superior Plus bought the company just one year ago from… Wellspring for $350 million

I’m not quite certain as to why Superior Plus ended up buying high and selling low. Maybe they overpaid in the first place. Maybe they mismanaged it. Maybe they felt serious pressure to generate cash, in order to continue paying off internal debt. What I am certain of, however, is that the CEO’s explanation doesn’t wash.

He told The Deal that the buy/sell discrepancy reflects a slowdown in construction and the impact of higher gas prices on production costs. Ok, but how come JW Aluminum actually has higher EBITDA today than when Superior Energy bought it last year? That’s right, we’ve come full circle to Steve.

3M Pharma
Unlike the JW Aluminum deal, I have no idea if the proposed three-way sale of 3M’s pharma assets is good or bad for either buyer or seller. I just know it’s good for pharma.

For the uninitiated, 3M yesterday agreed to sell its global pharmaceuticals division in three separate deals worth a total of around $2.1 billion. First, Graceway Pharmaceuticals, a Bristol, Tenn.-based drug company owned by GTCR, will pay $875 million for 3M’s pharma operations in the U.S., Canada and Latin America. Graceway also will subsume fellow GTCR portfolio company Chester Valley Pharmaceuticals. Second, Ironbridge Capital and Archer Capital (both of Australia) will acquire 3M’s Asia-Pacific pharma operations for $349 million. Finally, Sweden’s Meda will acquire 3M Pharma’s European business for $857 million.

This might be the deal that finally makes big buyout firms pay attention to pharma. To be clear: I mean actual pharma, not just facilities inside of which drugs are doled out (i.e., HCA or anyone who backs a nightclub). KKR, for example, has made exactly one pharma deal, and it was basically a venture capital/acquisition platform play (Jazz Pharmaceuticals). 

A few weeks back, I asked a healthcare I-banker why buyout firms seemed so disinterested in a market that now comprises around 15% of all venture capital disbursements. The response was that the market was simply waiting for a few multi-billion dollar deals to occur, in order to make everyone feel a bit more comfortable.

I emailed the banker this morning to inquire as to whether or not the 3M deal could be at least the flint if not the actual spark. The response: “That’s exactly what I was thinking.”

So what do you think should be the inaugural Deal of the Week? JW Aluminum or 3M Pharma?