DLJ Merchant Banking Looks To Sell Total Safety

DLJ Merchant Banking Partners is prepping portfolio company Total Safety U.S. for a sale, multiple sources tell peHUB.

Before continuing, it is important to note that those sources do not include either DLJMB or Total Safety CEO David Fanta, who strenuously denied sale plans. “We’re owned by private equity, so obviously there will a deal at some point,” Fanta said. “But it’s not happening right now.”

So we have a case of “they said, they said.” Pretty typical, although on-the-record denials about such things are fairly unusual (we considered spiking the story, but then got independent confirmation from an additional source).

DLJMB bought Total Safety in December 2006 from H.I.G. Capital, in a deal that included $68 million of equity and $130 million in first and second lien debt. That’s a hefty amount of leverage, but one banking source says Total Safety is a “strong” company that could sell for an EBITDA multiple of around 8x.

Possible strategic suitors could include WW Grainger or Kimberly-Clark.

Houston-based Total Safety was formed in 1994 focused on serving the needs of the gas and oil industry. It operates in three segments: Safety equipment rentals, equipment sales and safety systems and services. The company had $186 million in revenue for the 12-months ended Sept. 30, according to a February report from Moody’s.

As an outsourcer, Total Safety’s biggest threat isn’t from other companies but from customers who choose to service their safety and compliance needs in-house, Moody’s said.

The recent BP debacle has highlighted the need for safety in the oil and gas industry, said one buyout executive: “[The spill] reminds people that these systems are very complicated. There’s pressure, there’s chemicals and lots of things that could go critical.”

Total Safety is highly leveraged with $137 million in debt, adjusted for operating leases, as of Sept. 30, according to an April report from S&P. Adjusted debt to trailing-12-months, EBITDA was a very aggressive 4.6 times, S&P said.

Total Safety’s credit outlook is stable, but S&P might go negative if the company’s experiences negative cash flow or if leveraged approaches five times. “A positive ratings action is unlikely given the limitations of the business scope and scale,” S&P said in the April report.