Gundle/SLT Environmental Inc., known as GSE, has signed a merger agreement with investment firm Code Hennessy & Simmons LLC that will take the producer of plastic landfill liners from publicly traded to privately held.
The agreement, signed Dec. 31, will add the company to the growing fund of plastics-related businesses operated by CHS. The group will own about 92 percent of GSE, with about 8 percent held by several GSE executives.
The purchase should be completed by the end of March, contingent upon financing and approval by shareholders and regulatory authorities, said Dan Hennessy, a founder and partner in Chicago-based CHS.
CHS and the executive group will pay $18.50 per share of GSE stock, with the overall deal valued at about $220 million plus assumed debt, Hennessy said. The stock, traded on the New York Stock Exchange, reached its 52-week high Dec. 31, closing at $21.50. It closed Jan. 2 at $18.l5 a share.
Houston-based GSE is a dominant player in a highly targeted niche, a virtue that attracted the private equity firm. GSE claims to be the world's leading manufacturer of geosynthetic lining products for environmental protection, including flexible geomembrane liners and drainage nets. The company also extrudes and fabricates specialty products including manhole covers, sumps and pipe penetration boots for the confinement of water and other substances. Most of its products are made from polyethylene or polypropylene.
Other plastics-related CHS properties include Precise Technology Inc. and Waddington North America Inc., both purchased in 2000.
CHS' familiarity with GSE's manufacturing processes and resins helped fuel the deal, Hennessy said Jan. 6. But CHS also was excited about the growth opportunities worldwide for GSE, especially in less-developed areas of Asia and Europe where environmental awareness is building, he said.
``In China, most landfills are unlined currently, but there is heightened sensitivity to environmental and health implications,'' Hennessy said. ``The same growth dynamic is occurring in Eastern Europe, where there are much more stringent requirements with respect to landfills and the containment of waste.''
GSE recorded $266.9 million in sales in 2002 and had seen a 2 percent growth in sales for the first nine months of 2003. However, profit declined last year, partly due to inclement weather. In February, the company retained Richmond, Va.-based investment firm Harris Williams & Co. to explore ways to increase shareholder value.
According to several sources, GSE had been shopped to several companies before finding a buyer in CHS. The move to the portfolio fund will offer GSE greater financing to support growth than what the public market could give a smaller company, said Roger Klatt, GSE chief financial officer and treasurer.
``Mini-cap companies have a hard time gaining a following in the public market,'' Klatt said.
GSE Chairman and Chief Executive Officer Samir Badawi will remain with the company, as will all other top executives.
The company will look at acquisitions, especially internationally, and internal growth to drive sales, Hennessy said. GSE already is the industry leader in geomembranes in North America, Western Europe and Asia, he said.
Some recent growth came in February, when GSE bought Serrot International Inc.'s textured line of geomembranes for $30 million.
The GSE management team and CHS have a goal to double the size of its business in five years, Hennessy said.