The following are summary descriptions of investments in which the Brera principals were significantly involved prior to the formation of Brera Capital Partners.
BW/IP International, Inc.
A major worldwide supplier of fluid transfer and control equipment primarily to the power and petrochemical industries, BW/IP was acquired from Borg Warner for $234 million in 1987. The company introduced a series of industry and application-specific service plans that greatly enhanced sales of its high margin spare parts. BW/IP subsequently acquired United Centrifugal Pumps Company, a provider of complementary products to the petroleum sector.
BW/IP's revenues grew from $430.4 million at an average annual compound rate of 11.9 percent, and its EBIT from ongoing businesses increased at a rate of 18.9 percent to $64.8 million. In 1991, BW/IP completed an initial public offering and is an NYSE company.
Classic Communications, Inc. is a non-metropolitan cable operator in the south central U.S. In July 1999, Brera and a co-investor group provided Classic with equity capital. That allowed Classic to merge with the Buford Group and, a short time later, to acquire Star Cable Associates. Collectively, these three operations formed the 11th largest cable operator in the U.S., with approximately 570 cable systems passing 700,000 homes and serving over 300,000 subscribers in 10 states.
Approximately 71% of Classic's customers reside in a county seat or are located within a 30-mile radius of a county seat. These markets typically have (a) larger populations, (b) more favorable demographics, (c) higher growth characteristics and (d) stronger economic activity than other non-metropolitan markets.
Classic is focused on increasing the revenue-generating bandwidth of its cable plant. The Company is in the process of enhancing the services which it offers to its subscribers by upgrading or rebuilding cable plant, and consolidating headends. As a result of this process, the Company has been able to launch a digital video service and a high-speed data product.
Classic Communications completed an initial public offering in December 1999. The company's stock is traded on the NASDAQ under the symbol of "CLSC".
Kendall International, Inc.
Purchased from Colgate-Palmolive Company in 1988 for $960 million, Kendall manufactures, markets and distributes disposable medical supplies and devices to hospitals and other health care facilities, as well as home healthcare products to pharmacies and other retail outlets worldwide.
Following a difficult period resulting from a change in the competitive environment due to new federal government health reimbursement regulations, as well as the loss of a major customer resulting from the collapse of the Russian economy, Kendall's operations and finances were significantly restructured. Research and development increased both internally and through strategic alliances. Product lines were streamlined to capture market share and increase penetration in more rapidly growing markets. Foreign marketing efforts were reorganized and strengthened.
Kendall was reshaped into a successful healthcare company with continuously improving operating margins and strong market share in numerous product categories. The aggregate investment of $133.1 million resulted in a realized value of $329.3 million. Kendall was purchased by Tyco International in 1994.
O.M. Scott & Sons
Acquired from ITT Corporation in 1986 for $230 million, Scott is the dominant company in the homeowner lawn care industry and is a leading supplier of turf care products to commercial users. Scott was refocused by splitting the company into two businesses, commercial and consumer. Hyponex, the largest supplier of organic lawn and garden products in the U.S., was acquired to provide a number of highly complementary product lines.
Research and development expenditures were greatly expanded, resulting in the introduction of 43 distinct new products. Scott's sales more than doubled from $192.4 million to $413.6 million in under six years, while earnings increased from $20.6 million to $42.2 million. The company completed an initial public offering in 1992 and is a NASDAQ listed company.
Riverwood is a leading supplier of paperboard packaging solutions to multinational beverage and consumer products companies such as Anheuser-Busch, Miller Brewing, numerous Coca-Cola and Pepsi-Cola bottling companies, and Unilever. Riverwood was acquired in 1996 when the Manville Trust decided to sell its 80 percent ownership in the business.
Responding to a difficult market that had significantly reduced prices in several product areas, non-core assets were divested to focus the company's energies on its main business. Management was strengthened while the company's costs were pared. Emphasis was placed on completing a substantial capital expenditure program designed to shift the company's business from more cyclical grades of containerboard to the proprietary, high application oriented coated board segment. The repositioning of the business is expected to restore the past diminution in value and materially increase future value.
Van Kampen American Capital
Van Kampen, a fixed income money management firm that provides investment advisory services to open-end and closed unit investment trusts and institutional clients, was acquired from Xerox Corporation in 1993 for $359 million. American Capital, an equity-oriented money management company, was acquired from Travelers in 1994 for $432 million. Its equity-oriented products were complementary to Van Kampen's, and allowed the creation of a "full family of funds" to be offered to retail investors.
Operating profits more than doubled in three years as the company improved its competitive position in the mutual fund industry. In 1996, VKAC was sold to Morgan Stanley & Co. for approximately $1.2 billion.
WESCO Distribution, Inc.
Established in 1922 as a captive distributor of Westinghouse Corporation's own power products and appliance lines, WESCO is a leading full-line North American distributor of electrical products. The company was purchased from Westinghouse in 1994 for $330 million.
The strategic actions taken resulted in a strengthening of management and a streamlining of the product mix, which featured 130,000 items at the time of acquisition. In addition, operations at both the store and distribution center levels were rationalized, and inventory control systems were dramatically improved. Company-wide incentive systems were implemented that create and reward accountability by product line and business segment. A number of complementary acquisitions were also consummated, adding $326.3 million in sales. Revenues for 1996 were $2.285 billion, a 45 percent increase since year-end 1993, with EBITDA climbing to $81 million from only $4.4 million at the time of acquisition.
The dramatically improved company was sold June 5, 1998 to The Cypress Group for $1.1 billion. The cash return of this investment was $511 million or 6.1x the original equity with an IRR of 52%.