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Politics : Sioux Nation -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (34553)	8/25/2005 3:02:57 PM
From: stockman_scott	Read Replies (1) \| Respond to of 362646

Buy high, sell low, take a profit ___________________________________________________ by David Carey TheDeal.com 25, Aug 2005 In a nifty trick reminiscent of "Catch-22" 's Milo Minderbinder, Carlyle Group is selling a portfolio company for less than it paid but will nonetheless reap a profit. In a deal expected to be announced today, the Washington-based private equity firm will offload laminated-panel maker Panolam Industries International Inc. to Genstar Capital LLC and Sterling Group LP. People familiar with the deal said San Francisco buyout shop Genstar and Houston investment firm Sterling will pay just under $400 million. That compares with the $402 million Carlyle paid in late 1999 to buy the Shelton, Conn.-based business from none other than Genstar. Carlyle, despite getting less than it shelled out, will register a gain of 50% to 100% on its $150 million equity investment, a source said. The profit includes a one-time dividend payment of about $70 million late last year. How did Carlyle do it? Because the 1999 leveraged buyout was conservatively leveraged and affordably priced, Panolam, in subsequent years, was able to use much of its cash flow to slash debt. As a result, Carlyle will pocket a large portion of the sale proceeds. Even though Panolam's revenue tumbled during the recession, cash flows dipped less, thanks to aggressive production cost cuts. Shouldering roughly $225 million of loans following the 1999 LBO, Panolam managed to cut debt to $141 million by Sept. 30, 2004, according to a Moody's Investor Service report last November. Even after last year's leveraged recap, Panolam carried less debt than in 1999. Under Genstar, which first bought Panolam in 1996 for $94 million, and then Carlyle, Panolam's manufacturing efficiency has improved sharply, propelling Ebitda margins into the high teens. The company produces laminated particle-board-and-melamine panels used in office furniture and kitchen countertops and cabinets. Why Genstar chose to reacquire Panolam isn't clear, although the hefty profit it scored the first time, no doubt, made for pleasant memories. A spokeswoman for Genstar said Wednesday the firm wouldn't comment until after the deal closes this fall. Sterling Group didn't return a message, and partners at Carlyle involved in the deal refused comment. Credit Suisse First Boston and Jefferies & Co. are arranging a credit package for the buyout. In Joseph Heller's novel "Catch-22," the character Milo Minderbinder buys eggs in Malta for 7 cents each and sells them to the mess hall at an American airbase in Italy for 5 cents, somehow earning a profit.