Castle Harlan, Inc., the New York private equity firm, announced today that it and its Australian affiliate CHAMP Private Equity have been honored by The Australian Private Equity and Venture Capital Association (AVCAL) for their successful investment in United Malt Holdings Inc. (UMH). UMH is a world-wide producer of barley malt for distillers and brewers that the two firms acquired in 2006 for approximately US$155 million and sold at the end of 2009 for US$655 million.
“We are very pleased that AVCAL has recognized our hard work and success in transforming UMH from a commodity business to a supplier of customized malt to each of our brewer and distiller customers – a transformation that enabled us to create very significant value to our investors in just three years,” said Howard D. Morgan, co-president of Castle Harlan. “This investment is an excellent example of the effectiveness of our Castle Harlan and CHAMP partnership, as well as how new investors can work with management to redefine and grow a business.”
The AVCAL award cited the United Malt investment as the best management buyout in the range of A$100 million to A$500 million:
“UMH manufactures malt for the world’s largest brewers and distillers who use malt in the production of beer and whiskey. UMH operates in Australia, US, Canada and the UK. UMH was acquired from ConAgra Foods and Tiger Brands in September 2006 for approximately US$155 million. At the time of acquisition, UMH had EBITDA of US$27m. In November 2009, UMH was sold to the ASX-listed GrainCorp for $655m. At exit, UMH EBITDA had grown to US$116m, more than 300% higher than at the time of CHAMP’s and CHI’s acquisition. In US$ terms on the equity invested into UMH, CHAMP and CHI achieved a return in excess of 6x their money at an IRR of approximately 90%.”
David Pittaway, the senior managing director at Castle Harlan who worked most closely with UMH, said UMH management suggested switching to the customization model during Castle Harlan’s due diligence process. He explained that brewers, for example, need a specific kind of malt so that each beer they produce tastes the same, no matter which of their production breweries makes the beer. In a commodity model, barley processors send a general malt to each brewer, regardless of their requirements, and the brewer adjusts the recipe to attain uniformity. The switch by UMH reduced the adjustment needed, enabling it to charge a premium, Pittaway said.
"We converted the business to provide the solution and perfect product for each customer," Pittaway said, adding that the change did not depend on a large-scale capital investment in more equipment or technology. Rather, it came from a tight focus on the malting process to produce to a specification instead of maximizing volume.
Castle Harlan, founded in 1987, invests in controlling interests in the buyout and development of middle-market companies in North America and Europe. Its team of 19 investment professionals has completed 51 acquisitions since its inception with a total value in excess of $9.6 billion. Castle Harlan currently manages investment funds with equity commitments of $3.6 billion. The firm traces its roots to the start of the institutionalized private-equity business in the late 1960s.
Castle Harlan's current portfolio of companies, which employ more than 36,000 people, includes Baker & Taylor, the world’s largest distributor of books and entertainment products to libraries and retailers; Pretium Packaging LLC, one of the country’s leading manufacturers of custom-designed specialty plastic containers for the food, pharmaceutical, personal-care and household markets; and IDQ Holdings, Inc., the industry leader in Do-it-Yourself, branded products for servicing and repairing automotive air conditioners.
CHAMP Private Equity was formed in 2000 by Castle Harlan and Australian Mezzanine Investments Ltd. (AMIL) of Sydney. CHAMP and AMIL constitute Australia’s longest established private equity investor, and funds advised by them have made some 60 investments since 1987 in companies operating in Australia and New Zealand.
For more information, visit www.castleharlan.com.