Fremont Partners Sells Tapco International Corporation to Headwaters Incorporated.
SAN FRANCISCO -- Fremont Partners, a private equity fund managing $1.8 billion of capital, today announced that it has sold Tapco International Corporation ("Tapco" or the "Company") to Headwaters Incorporated ("Headwaters") (Nasdaq:HDWR) for $715 million in cash plus potential proceeds related to tax benefits.
Tapco is a leading designer, manufacturer, and marketer of accessory products and professional installation tools for the remodeling and new construction of residential exteriors. The Company is located in Wixom, Michigan and is a portfolio company of Fremont Partners II, Fremont Partners III, and a related Fremont Partners co-investment partnership. Fremont Partners II and the co-investment partnership invested $100 million and $50 million, respectively, in Tapco in June 1999 alongside management and the founder's estate, which retained a meaningful stake. As described below Fremont Partners III invested $41.5 million in Tapco in April 2002.
Fremont Partners II is realizing a gross IRR of approximately 22.3% and a cash-on-cash return of approximately 2.5x since June 1999. Fremont Partners III is realizing a gross IRR of 31.8% and a cash-on-cash return of nearly 2x since April 2002. These returns are before any consideration related to tax benefits. With this distribution to date, Fremont Partners has returned $742 million or 124% of invested capital to Fremont Partners II, its 1996 fund, and $225 million or 79% of invested capital to Fremont Partners III, its 2001 fund.
"Today's sale represents an excellent outcome for our investors and is representative of our investment approach: acquire businesses with attractive operating fundamentals and then work in partnership with management to strengthen the strategic and financial position of those businesses through growth strategies and operating improvements," said James T. Farrell, Managing Partner of Fremont Partners. He added, "Tapco's management team is also excited by the opportunity to continue to execute its long term strategic plans with Headwaters, an emerging leader in high growth building products businesses."
Tapco is a typical Fremont Partners' investment: strong partnership with management and value creation from operating initiatives and strategic acquisitions. During Fremont's involvement, Tapco has achieved solid organic revenue growth, improved productivity and margins, and reinvested its free cash flow to strengthen the business, complete several accretive acquisitions, and provide returns to its investors. Tapco's purchase of Vantage Building Products in April 2002 was also financed by a $41.5 million investment from Fremont Partners III.
