Willis Stein Goes Back To School with Troll Deal –

Willis Stein & Partners in late March acquired Troll Communications, a publisher that sells children’s books through teachers at grade schools, in a $69 million buyout from Torstar Corp.

The Chicago-based firm now joins a list of groups that have begun to target the education industry. The line-up includes Bain Capital, GTCR Golder Rauner, J.W. Childs Associates, Leeds Group and Michael Milken’s Knowledge Universe (BUYOUTS Dec. 21, 1998, p. 15). Willis Stein may look to partner with some of these buyers when building Troll, said Daniel Blumenthal, a managing director at the firm.

The group acquired Troll as a turnaround investment, although Willis Stein expects to employ a platform approach to grow the company. The firm structured the investment conservatively and may invest more equity in later add-ons, Mr. Blumenthal said, declining to give further details. Fleet Bank was the senior lender.

The firm has been looking to invest in the education industry for several years but could not get comfortable with the high purchase multiples most companies were fetching in the industry, Mr. Blumenthal said.

Mahwah, N.J.-based Troll is an inexpensive entry point as revenue in the company has dropped to $100 million last year from about $140 million because of poor marketing and management, he said. Morgan Stanley Dean Witter arranged the company’s auction, which attracted other financial buyers, Mr. Blumenthal said.

Troll sells children’s books by distributing monthly catalogs to teachers who give them to students. The company competes directly against powerhouse Scholastic Corp. in the niche market.

Despite being smaller than Scholastic, Troll’s catalogs are distributed in 80% of public and private schools, Mr. Blumenthal said, thereby making it an attractive company.

By acquiring Troll, the firm plans to sell more services, including software, to students through its catalogs. The firm also will focus on identifying which teachers generate the most orders so it can market its products most effectively.

Troll distributes its catalogs directly to teachers and gives the schools credit, based on sales, towards future purchases.