NEW YORK, August 20, 2007 - Castle Harlan, Inc., the New York private equity investment firm, announced today it has completed the sale of its interest in Polypipe Group, a leading supplier of plastic pipe systems in the United Kingdom and Ireland, to company management and the Bank of Scotland. The total enterprise value of the transaction was $880 million. In just under two years, Castle Harlan said, it realized a total return of almost 4.5 times its original equity investment, generating an annual IRR of more than 150 percent.
Castle Harlan, in partnership with almost 50 members of the Polypipe management team, bought the company, based in Doncaster, South Yorkshire, U.K., in September 2005. Polypipe has approximately 2,800 employees, mostly in the U.K., and also serves niche segments of the plastic pipe and fittings markets in Germany and France. Last month, Polypipe acquired Terrain, a leader in the commercial piping systems market in the U.K. for approximately $85 million.
The management team of almost 50 executives, who continue their ownership in Polypipe, is headed by David G. Hall, the chief executive officer. He took over that position when Castle Harlan acquired Polypipe and has many years of experience in the plastic pipe business. At closing, the management team rolled all of its gains into the new transaction and now owns a majority of the equity in the company.
Howard D. Morgan, a senior managing director at Castle Harlan and a Polypipe board member, said Castle Harlan "worked with management to bring significant focus and simplification to Polypipe's product and market organization."
"We invested heavily in capital equipment, new products and acquisitions, changing momentum and increasing earnings before interest, taxes, depreciation and amortization (EBITDA) significantly, while generating cash," Morgan said. "Polypipe now is the leading brand in each of the residential, civil and commercial sectors in the U.K., and has a strong position in the markets for plastic piping and sanitary systems throughout Europe."
Commenting on the sale process, Thomas Hickey, Castle Harlan managing director who was involved in the transaction, said the firm "certainly didn't expect to exit our investment in Polypipe this quickly and had focused on building Polypipe for the long term."
"However, we offered the Polypipe management team a chance to pursue this transaction, which they did successfully," Hickey said. "Castle Harlan is very glad that the transaction gives the management team a majority interest in the business and an even longer-term investment horizon, with the new integrated financial backing of the Bank of Scotland. It's a great deal all around."
Castle Harlan and Polypipe Group also announced that, as a lasting tribute to the success of the relationship and to the employees, each is contributing equally $200,000 to endow a $400,000 charitable scholarship fund for the education of Polypipe personnel and their families.
Castle Harlan, founded in 1987, invests in controlling interests in the buyout and development of middle-market companies in North America, Europe and, together with CHAMP Private Equity, in Australasia. Its team of 19 investment professionals in New York has completed 48 acquisitions since its inception with a total value in excess of $9 billion.
Castle Harlan's current portfolio companies, which employ more than 42,000 people, include Ames True Temper, a leading manufacturer of lawn and garden tools and accessories; Baker & Taylor, the leading global distributor of books and entertainment products to libraries and retailers, and Perkins & Marie Callender's, Inc., which operates and franchises 618 family restaurants in the U.S. and Canada.