Inside the exit: Castle Harlan discusses sale of geogrid maker Tensar to CMC

Earlier this week, New York-based private equity firm Castle Harlan sold Tensar to publicly-traded Commercial Metals Company, a steel and metal maker in Irving, Texas, for $550 million. Tensar, headquartered in Alpharetta, Georgia, makes materials known as “geogrids,” which reinforce soil in foundations for a range of applications, including roads, airports and railroads. The company is benefiting from a renewed focus on infrastructure in the US and throughout the world. PE Hub spoke with Castle Harlan senior managing director Marcel Fournier about the exit.

Castle Harlan held onto the company for seven years. Although Fournier declined to disclose returns, he described the deal as “a very pleasant outcome for our investors.” He described Tensar as “great business, which has room to grow in the most meaningful manner for many years.”

He said Castle Harlan transformed Tensar into a globally recognized company within the construction sector. “We supported a new internal structure,” he said. “We invested in R&D. We developed a whole new generation of products, which are now being introduced around the world. We entered new geographies, such as India and Vietnam; and we grew the volumes, the revenues and the profitability of the company.”

Fournier said the PE firm also focused on overhauling the company by bringing in new management, among them a new CEO and CFO, as well as rejuvenating the sales and marketing approach.

In the US, the need for overhauling the aging infrastructure is urgent, and President Joe Biden recently signed into law the Bipartisan Infrastructure Law, which will pave the way for more funding in capital projects. Demand for infrastructure development is also high in Europe, the Middle East and Asia, Fournier said.

Tensar also focuses on environmental impact. Fournier argues that it is possible to avoid construction methods and equipment that exacerbate high-carbon emission that can seriously affect the environment. In road construction for example, he said Tensar is now avoiding using old ways of building roads that involved digging up dirt and putting a lot of gravel and asphalt on it. With new environmentally friendly components made from recycled materials and new technology, Fournier said it’s possible to build cheaper and more durable infrastructure.

“These products have a positive carbon footprint for the user,” he said. “They also reduce the amount of asphalt, and they reduce the amount of maintenance. It’s very positive.”

When asked about the impact of covid on Tensar’s business, Fournier pointed out that the company’s customers span the globe. “I would say the pandemic did not slow Tensar down one bit,” he said. “We grew in 2020, we grew in 2021 and we’re still growing this year. The construction needs of the world did not stop.”

With CMC as a strategic buyer, rather than selling to another PE firm, Fournier hopes Tensar will have a “permanent home.”

Read more on PE firms investing in road construction here