Cornerstone Counts Blessings with Equitrac –

Saying the company’s growth has been ignored by Wall Street, Cornerstone Equity Investors last month announced its intent to sponsor a recapitalization of Equitrac Corp., a manufacturer of office equipment monitors, for approximately $100 million.

According to Michael Najjar, a managing director at the New York-based private equity firm, Cornerstone will help acquire all the shares outstanding of Equitrac at $25.25 per share. Equitrac management will commit $10 million, and $30 million will come from Cornerstone’s fourth fund, which closed on $550 million in 1996. Fleet Bank will provide senior and mezzanine debt.

Equitrac, a Nasdaq-listed company based in Coral Gables, Fla., makes equipment that monitors the use of copiers, fax machines and printers. Its biggest customers are law firms, which use Equitrac’s products to bill clients for the use of this equipment.

Equitrac’s share price was rising steadily until a year ago, when it peaked at $22 and drifted downward until the beginning of this year. On Feb. 16, the day before the deal was announced, Equitrac closed at $20.125. At press time, Equitrac’s shares were trading at $23.25.

Mr. Najjar said the company had 1996 revenue of more than $30 million and is anticipating revenue of $50 million in 1999. Equitrac’s operating profit has grown by nearly 25% each year since going public.

Cornerstone plans to hold the company for three to five years, during which time it will attempt to enter new markets and will start selling new products, such as Telemetrac, which allows companies that lease copy machines to track the machines’ use from remote locations. The firm also may grow the company through acquisitions.

Mr. Najjar said Cornerstone consulted with people familiar with the office equipment industry when considering the deal, and feels confident Equitrac will encounter little competition from new technologies or start-up companies, he said.

The recapitalization is in line with one of Cornerstone’s investment strategies, which is to focus on companies that provide business outsourcing services.

For example, in June, 1997, the firm aquired International Language Engineering, a Boulder, Colo.-based company that translates Web sites and instruction manuals for high-technology companies.

Mr. Najjar said Cornerstone’s fourth fund is more than 50% invested. The firm usually begins fund raising for a new fund when the current one is 70% invested, said a partner at the firm.