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| Main Street
Resources Wraps Up Disc Graphics Privatization |
by K.M.
BUYOUTS
FEBRUARY 18, 2003
Westport, Conn.-based Main Street Resources recently closed
its acquisition of Disc Graphics, taking the company private
in a $20 million deal. The firm teamed up with management, led
by Disc Graphics Chairman and CEO Donald Sinkin, for the transaction,
which paid stockholders $1.82 a share, representing a premium
of 65% over its closing price the day prior to the deal's announcement.
The company also got some help from publicly held Paxar, which
chipped in with an equity contribution.
“This is the kind of deal we're looking for,” said
Main Street Resources Founder Dan Levinson, who had been a stockholder in Disc
Graphics prior to the acquisition. “Our firm targets proprietary
deals, without auctions or any investment bankers, and being
able to bring in a strategic partner like Paxar makes this deal
a no-brainer.”
Disc Graphics, headquartered in
Hauppauge, N.Y., is a diversified
manufacturer and printer of specialty
packaging. The company focuses on
the home video, pharmaceutical,
music, publishing and cosmetic
markets. In the first three quarters of
fiscal 2002, the company reported
profits of $421,000, on revenues of
$37.34 million. That represented an
improvement over a year-earlier net
loss of $1.291 million. At its peak,
Disc put up revenues of around $70
million.
In financing this deal, Disc Graphics management contributed
$5 million of the $10 million equity commitment, while Main Street Resources supplied
$4 million and Paxar put in $1 million. The buying group also
assumed $10 million of Disc Graphics debt.
From Disc Graphic's standpoint, the sagging stock market was
one of the main drivers to doing this deal. Disc Graphics CFO
Margaret Krumholz said, “From our perspective of what was
going to happen to our stock in this market - regardless of
how we performed [financially] - we didn't believe the public
market would be representative of our true value. It didn't
serve our shareholders or the company to stay public.”
The Sarbanes Oxley Act, a new set of disclosure laws instituted
this past year in an effort to raise standards of corporate
accountability, also played a role in Disc Graphic going private.
“That would have made the public arena more costly and
risky, with the increased scrutiny,” Krumholz added.
Main Street Resources, formerly known as Colt Capital, used
its $65 million SBIC fund for the acquisition, and the fund
still has more than 80% of the original capital remaining. Disc
Graphics joins Best, Pawtucket Fasteners, Sage Parts and H.W.
Baker Linen in Main Street Resources's portfolio.
Main Street Resources typically commits between $2 million and $10 million of
equity capital in its investments, which encompass acquisition,
growth capital fundings, equity financings and select startups
and turnarounds. The firm also donates a minimum of 20% of its
earnings to charitable causes through the Main Street Resources Charitable Foundation.
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