13i Capital Expands Copper Co. in Europe –

The threat of a capital gains tax hike in Germany hastened a deal close for 13i Capital Corp., which last month acquired a German copper parts company in a deal valued at less than $10 million.

The acquisition of Illg Umformtecknik gives 13i a more secure foothold in the European market for copper components, according to William Suddath, a managing director at the firm. In January, 13i bought a production facility in Ireland through its Thorntown, Ind.-based platform, Stalcop, as a jumping off point to Europe.

13i was alerted to the German deal by a manager they were considering hiring. The founder of Illg Umformtecknik was eager to find a buyer before any changes were made to Germany’s 50% exclusion rule for capital gains tax. Germany’s newly elected chancellor has said he supports taxing 100% of capital gains, although no legislation has yet been passed. Although Mr. Suddath declined to state terms of the deal, he said the company was purchased for a multiple of less than five times EBIT.

Bank One Corp. provided senior and mezzanine financing for the deal.

13i acquired Stalcop in 1994 for less than $10 million.

According to Mr. Suddath, Stalcop’s EBIT has more than tripled since the buyout. However, the managers of the company have found many European customers resistant to buying parts from a U.S.-based company because of the potential for currency fluctuation. This prompted 13i to begin scouting for European add-ons. 13i also is prospecting deals in Asia, Mr. Suddath added.

13i, based in Northbrook, Ill., was founded in 1994 by Mr. Suddath and Ram Thukkaram, the other managing director. The firm has no fund, but draws down capital from individuals on a deal-by-deal basis. The firm looks for platform companies in the manufacturing sector with annual sales of between $15 million and $30 million.

Prior to founding 13i, Mr. Suddath was president of the buyout financing arm of Household Commercial Financial Services, a subsidiary of Household Finance Co. Mr. Thukkaram is an entrepreneur in the automotive parts industry.