Winston Partners was notably quiet for more than a year, until last week, when it announced two deals.
The McLean private equity firm -- co-founded by Marvin P. Bush, the president's brother -- sold one company for a large gain and bought another.
Winston said Tuesday that it was selling American Background Information Services Inc. of Winchester, Va., a provider of background checks, for $18.5 million in cash to Intersections Inc., a credit-screening company in Chantilly that went public last April. Intersections also agreed to repay $1.4 million of American Background's bank debt.
Winston, according to the sale announcement, initially invested $3 million in American Background's parent company, Amsec International, in August 2000. Winston brought in new management and helped the company grow with $1.3 million more in early 2002.
Also last week, in a deal led by Winston managing partner Douglas H. Gilbert, Winston and New Jersey's Theo Capital bought Santana Products Inc., a leading maker of partitions used in public restrooms. The Scranton, Pa., company's products are sold under the brand Hiney Hiders. Winston and Theo bought the company from the Scranton family that has owned it since 1978.
The price was not disclosed. Pittsburgh's PNC Bank provided senior debt to fund the deal, and McLean's Gladstone Capital provided subordinated debt.
A. Scott Andrews, a Winston co-founder who runs its buyout group, said the Santana deal took nine months to complete. The company was a smaller division of a larger, family-run company, and such deals typically take longer than stand-alone corporate transactions. The Lynch family will retain a small interest in Santana, Andrews said.
Though it made money, the American Background sale wasn't a typical Winston deal, he said. "That was more of a build-up than what we would do today," Andrews said. "We're looking for businesses with larger critical mass than [American Background] had when we bought it."
Winston is about one-third through its second buyout fund, a $60 million fund Winston closed on in late 2003. When it is fully deployed, the fund should hold six or seven portfolio companies, Andrews said. He added that he would like whatever new buyouts are made to be deals that Winston either controls or shares controlling interest with one other fund. The Santana deal was a partnership with Theo, but Winston has the largest stake, Andrews said.
"Our overall strategy has become more targeted toward the small-cap market companies," Andrews said. "We've done participating deals in the past, but the remainder of our investments in the fund will probably be control investments."
Andrews founded Winston in 1993 with Bush.
Marvin Bush runs Winston's biggest business, its hedge-fund advisory business. Winston advises well-heeled investors on what hedge funds to buy into. Including its relatively small buyout fund, Winston manages $1.2 billion. In March 2002, Mercantile Bankshares Corp. in Baltimore bought a stake in Winston Partners.
The buyout group's typical deal is worth $10 million to $50 million.
Winston's major buyouts include:
• International Legwear Group, a North Carolina-based sock manufacturer. ILG in July bought Peds footwear brand for $29 million, with financial backing from Winston and partner Hunt Group out of Dallas. ILG is a platform company, a holding company that Winston uses to buy and consolidate privately owned firms under a larger umbrella.
• Hobart West Group, a New Jersey legal services and staffing firm that is the largest provider of court reporters in the United States.
• National Waste Services Inc., a Delaware-based trash company that owns a landfill in Luray, Va.
Other investments include MetroPCS Inc., a Dallas wireless phone service provider; Vienna-based business technology company Digital Focus Inc.; and Arlington's Applied Predictive Technologies Inc., a retail consulting firm. Winston's portfolio companies do business in the commercial sector, not the government sector.
