Arnold acquired for $130M

Andrea Deckert//March 9, 2012//

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Arnold Magnetic Technologies Holding Corp. has been acquired by a Connecticut company for $130.5 million.

Compass Diversified Holdings acquired the Rochester-based magnet manufacturer this week. The purchase price was based on a total enterprise value of $124.2 million and $6.3 million of cash and working capital adjustments, Compass Diversified Holdings said.

Compass Diversified (NYSE: CODI) is a public investment firm specializing in acquiring controlling stakes in small to middle-market companies.

The firm’s initial common equity ownership in Arnold as a result of the transaction is roughly 96.7 percent on a primary basis. In addition to its equity investment in Arnold, Compass Diversified provided loans totaling $85.5 million to Arnold as part of the transaction. Arnold’s management invested alongside Compass and owns the remaining 3.3 percent.

Compass Diversified CEO Alan Offenberg said Arnold was attractive to his firm based on its market position, diversified customer base, stable cash flow, management and growth prospects.

The firm seeks to invest in industries such as manufacturing, distribution, consumer products and business services. It prefers to invest in companies based in North America with a transaction size of $60 million to $300 million, cash flows of $5 million to $40 million and enterprise values of $50 million to $250 million.

Compass Diversified acquired Arnold from the Boston-based Audax Group, a private-equity investment firm that had bought Arnold in 2005 from SPS Technologies Inc. for an undisclosed sum.

Arnold reported revenue of roughly $135.8 million in 2011.

Arnold has 700 employees, including 80 local workers, and more than 2,000 customers worldwide. The firm manufactures magnetic products and assemblies for applications in advertising and promotions, medicine, vehicles, energy, aerospace and defense, reprographic systems, consumer products and appliances.

Arnold has 10 manufacturing facilities, including sites in Rochester, Ohio, Nebraska and Illinois, along with facilities overseas in the United Kingdom, Switzerland and China. The company had moved its headquarters from Marengo, Ill., to Rochester in 2003.

The local operation focuses on precision assembly and magnets and Arnold’s legacy business of reprographic assemblies. Reprographics is a blanket term incorporating methods of copying content, such as scanning, xerography and digital printing.

Arnold CEO Timothy Wilson will continue to lead the company, Compass Diversified said.

Wilson said this week that he does not anticipate any impact on the Rochester operation and that its workforce will stay the same. The deal will give Arnold more opportunities to grow the business, he added.

Wilson has held the top spot at Arnold for the past three years, succeeding longtime leader Gordon McNeil. Wilson has been at the firm roughly a decade and previously was chief operating officer. Before that, he was Arnold’s president of North American operations.

Since Wilson took over, the company has worked on lean initiatives and sharpened its focus on targeted markets such as alternative energy, including hybrid and electric vehicles and wind and tidal power. Company leaders also are focusing on domestic rare earth magnet production, a move they say is essential for meeting alternative energy demands