NY Shop Completes Investment In Former Exit Source

Target: Wabash International Corp.

Price: $35 million

Sponsor: Lincolnshire Management

Seller: Wabash International Corp.

Financial Adviser: Seller: BB&T Capital Markets Inc.

More than two years ago, Lincolnshire Management made a handsome profit on its sale of a portfolio company to a strategic buyer. Now, the mid-market shop is returning the favor, paying $35 million for a minority stake in that same strategic buyer, Wabash National Corp.

The PIPE deal, which was completed on August 3, gives Lincolnshire preferred stock and a warrant representing a 44.2 percent stake in Wabash National, a semi-trailer manufacturer headquartered in Lafayette, Ind. Concurrent with the investment, Wabash National also amended its revolving credit facility, which now provides for borrowings of up to $100 million.

Under certain circumstances, such as Wabash National losing its ability to utilize its net operating loss carryforwards, Lincolnshire will be able to boost its stake in the company to 49.9 percent. The dividend rates for the different classes of preferred stock included in the deal vary between 15 percent, 16 percent and 18 percent per year. The dividends are payable on a quarterly basis, and the payout rates will be increased by 0.5 percent every quarter if the respective classes of preferred stock are still outstanding five years after the closing of the transaction.

Through this latest deal, New York-based Lincolnshire is hoping to replicate the success it enjoyed with its investment in Transcraft Corp., Michael Lyons, senior managing director, told Buyouts. The mid-market firm sold Transcraft, a maker of flatbed and drop deck trailers, to Wabash National in March 2006 for $71 million. Lincolnshire made between 2.5x and 3x its equity on the sale after buying Transcraft in 1999 in a deal valued at $61.2 million.

Transcraft, at the time of Lincolnshire’s initial investment, was grappling with a downturn in the trailer industry, as Wabash National is now. “Our successful hands-on experience with Transcraft as it suffered through the last cyclical downturn in the trailer industry positions us well for Wabash,” Lyons wrote in an e-mail.

As part of the investment, Lyons and four other Lincolnshire-nominated people will join the 12-person board of Wabash National, whose products include aluminum trailers, platform trailers and refrigerator trailers. In addition, the company’s retail and distribution segment also markets new and used trailers and provides parts and maintenance services.

Lincolnshire made the investment out of its third fund, Lincolnshire Equity Fund III, a $443 million pool closed in 2005. The firm has already closed its fourth fund, Lincolnshire Equity Fund IV, at $835 million in November 2008.

Wabash National is the first investment for Lincolnshire since April 2008, when it bought Kathryn Beich Inc., a Bloomington, Ill.-based candy company founded in 1854. The firm typically invests between $5 million and $50 million in companies with sales between $25 million and $500 million, enterprise values between $50 million and $300 million, and operating cash flow between $5 million and $50 million. Sectors of interest include niche manufacturing, distribution and service-related sectors. Lincolnshire has additional offices in Los Angeles, Atlanta, Chicago and Boston.