Joseph Littlejohn Rides Bus Purchase to Mexico –

Signaling an increasingly cross-border investment strategy, New York buyout firm Joseph Littlejohn & Levy (JLL) will move production operations of its latest acquisition, a bus manufacturer, to Mexico to cut costs.

The firm also has been scouting for deals in Europe.

Last month, JLL acquired an approximately 61% stake in MCII Holdings (USA)-the motor coach manufacturing division of Mexican conglomerate Consorico G Grupo Dina-for $775 million.

JLL will contribute $150 million in new equity to the deal, with CIBC World Markets co-investing $25 million in equity.

CIBC led a $150 million high-yield offering and provided the balance of debt in the form of senior financing.

The remaining 39% of the company will remain in the hands of the Gomez-Flores family, which controls Grupo Dina.

According to Paul Levy, a senior managing director at JLL, Grupo Dina, listed on the New York Stock Exchange, was seeking a liquidity event. CIBC, which advised the Mexican group on the sale, approached JLL because of the firm’s interest in buying neglected divisions of large conglomerates, Mr. Levy said. For example, JLL earlier this year acquired a division of Hershey Food Corp. that makes pasta, renaming it New World Pasta (BUYOUTS Feb. 22, p. 18).

MCII Holdings has annual sales of approximately $1 billion. The company makes transit buses under the name MCII and buses for the travel industry under the name Viaggio. Although the company still commands a majority of the market, it has seen that share slip slightly in recent years, Mr. Levy said.

The company’s factories currently are located in the North American cities of Winnipeg, Manitoba and Pembina, N.D., as well as a parts hub in Louisville, Ky. MCII also has facilities in Sahagun, Mexico, and JLL plans to relocated more production facilities to that country to save on labor costs, Mr. Levy said.

Mr. Levy said his firm also hopes to regain market share through a new line of buses that soon will be unveiled, which includes a smaller recreational vehicle, similar to a trailer home, that will be marketed to individuals.

Mr. Levy said his firm is taking an “opportunistic” approach to investing abroad. JLL will not raise a European fund or open permanent offices in Europe because it does not want to have a strategy limited to the region. “A lot of the people who have set up overseas now have a strategic bias to invest there,” Mr. Levy said.

Nevertheless, JLL has not shied away from foreign deals. In 1994, the firm acquired a German chemical company through its U.S. platform, Freedom Chemical, for $100 million. In 1997, JLL bought another German company, Lemmerz International, for $450 million, adding it on to its U.S. platform Hayes Wheels.

“Everybody is very excited about Europe,” Mr. Levy said, who recently returned from a deal-scouting trip in the U.K. “But the fact of the matter is, it’s a very competitive market. U.S. firms are paying up to get competitive positions there.”

The firm’s third buyout fund, which rounded up $1 billion in 1998, to date is approximately 30% invested and 45% committed, Mr. Levy said.