On July 6, the New York-based shop bought Norcast Wear Solutions, a supplier of mill liners and other products to the mining industry, from Pala Investments for $190 million. On July 7, the firm agreed to sell the Toronto-based company to Australian industrial company Bradken Ltd. for A$202 million ($217 million).
Castle Harlan could be looking at a gain on its equity of about 47 percent, and a return multiple of about 1.5x, assuming it invested about 30 percent equity—a rough average for private equity commitments today—in the $190 million acquisition of Norcast. Its internal rate of return, however, would be extraordinary.
It’s unclear exactly how the deal came about, though the firm has a fairly long history of dealing with Bradken.
CHAMP Private Equity, Castle Harlan’s Australian affiliate, bought Bradken back in 2001 for $94.2 million, according to Capital IQ. The firm exited the company via an initial public offering in 2004, according to CHAMP’s Web site. In 2006, Castle Harlan bought AmeriCast Technologies, a designer and manufacturer of steel castings, for $110 million, with Bradken taking a 19 percent minority stake. Less than two years later, Bradken bought the company for $288 million, according to Castle Harlan’s Web site. The firm earned about 3x its investment in AmeriCast, according to a 2010 Buyouts profile of Castle Harlan.
Howard D. Morgan, co-president of Castle Harlan, provided Buyouts with a prepared statement: “In the last ten years Castle Harlan and our Australian affiliate CHAMP have successfully partnered with corporate co-investors many times; this includes partnering with Liberty Media in the acquisition of Austar, partnering with ESCO in the acquisition of Bradken, partnering with Bradken in the acquisition of AmeriCast, and now partnering with Bradken again in the acquisition of Norcast. As private equity lead investors, we enabled these corporations to participate in investments that for many reasons they couldn’t or didn’t want to lead at the time. In several instances the corporate partner decided to own the business outright, and we at Castle Harlan saw immediate value-added from the partner and the possibility of a long term strategic fit.”
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Bernard Vaughan is a Senior Editor at Buyouts Magazine. Follow his tweets @BVaughanReuters.