On Friday, Permira announced it was buying a majority stake in Intelligrated in a deal valued at more than $500 million. Chris Cole and Jim McCarthy, who founded the company, are maintaining a significant stake in the business. “We will be retaining a significant stake,” says Cole, who is Intelligrated’s CEO. “We’ll have many millions of dollars tied up in it.”
The deal is expected to close in a month, says Cole.
Permira is investing $200 million equity in the deal, a source says. The investment is coming from the firm’s fourth PE fund, which raised €9.6 billion in 2006.
Intelligrated opened its doors on Sept. 4, 2001, one week before the terrorist attacks, Cole says. The company, at the time, had reached a “handshake” deal with Gryphon to invest although an official transaction didn’t come until November 2001. Management and Gryphon invested a total of $75 million at that time, Cole says.
Intelligrated designs and makes highly automated warehouses for Internet retailers and direct-to-consumer manufacturers in the food and beverage industry. It employs about 2,000 people and produces about $500 million in annual revenue. In 2006, Gryphon sold part of their stake in the company to Tudor Capital, of Boston. Tudor is also selling to Permira, Cole says.
Intelligrated’s biggest deal came in 2009 when the company acquired FKI Logistex North America.
The process of finding a new partner for Intelligrated began late last year, Cole says. Credit Suisse is providing staple financing, he says. With its sale to Permira, Intelligrated has gone from being the largest investment of a small PE firm, to being a “small to medium investment” of a large private equity firm, Cole says.
Cole has been associated with several PE firms, including Oak Hill Partners. He says he is used to partnering with private equity. “Particularly since the U.S. Congress has made it far more difficult to raise money on Wall Street through IPOs, private equity has been one of the best ways for entrepreneurs to grow their businesses,” he says.
While the sale provides an exit for Gryphon, the San Francisco PE firm has already more than made back its investment, peHUB has reported. Last year, Intelligrated paid out its third dividend, $75 million, to shareholders. Intelligrated distributed another $80 million to shareholders in 2010 and $20 million in 2006. “Gryphon has received dividends that are roughly the equivalent to what they invested,” Cole says.
Gryphon’s investment in Intelligrated came from its second and third funds, sources say. The PE firm typically invests $25 million to $75 million equity per deal in sectors including business services, consumer products & services, general industries & education and healthcare.
Brian McDonagh of Robert W. Baird advised the sellers on the sale, which also received advice from Lazard. Morgan Stanley advised Permira while RBC Capital acted as co-advisor.
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