Lone Star Funds has reached a deal to acquire equipment manufacturer Hillenbrand for an enterprise value of $3.8 billion, a sign of private equity’s continued strong appetite for buying companies off the stock market.
Shareholders in the Indiana-based business, which produces processing equipment for use in the plastics, food and recycling industries, among others, are to receive $32 per share, representing a 37% premium to Hillenbrand’s share price as of Aug. 5.
Hillenbrand’s stock has traded between $18.62 and $35.33 over the past 12 months.
The all-cash transaction comes at a time when private equity firms are pursuing increasingly larger take-private deals. The median size of take-private transactions in Q3 was $1.8 billion, a big step up from the $678.2 million median seen in Q2, according to PitchBook’s Q3 US PE Breakdown.
The total value of take-private deals so far this year has surpassed $200.3 billion, the same level it reached during the full year of 2021, when the lifting of pandemic-era restrictions sparked a surge in M&A activity.
The increased risk appetite of PE firms is due in part to an improvement in credit conditions, according to PitchBook analysts.
Manufacturing assets are also particularly attractive targets for PE firms, said Jim Corridore, PitchBook’s senior industrials analyst. Their specialized functions make them good targets to grow into new business lines and geographies via a buy-and-build strategy, he said.
The stimulus that the manufacturing sector has received from the government’s efforts to onshore and reshore jobs serves as another tailwind for the sector, he added.
Hillenbrand has recently streamlined its portfolio through acquisitions and divestitures, while focusing on building its business geared toward the food equipment sector, it said in a statement announcing the take-private deal.
In March, the company completed the sale of a control interest in Milacron, an injection molding business, in a $287 million deal. Hillenbrand maintains a minority position in the business now owned by Bain Capital.
Evercore acted as financial adviser to Hillenbrand, and Skadden, Arps, Slate, Meagher & Flom served as legal counsel. Jefferies and UBS Investment Bank were financial advisers to Lone Star, while Kirkland & Ellis served as legal counsel.
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