Saturday, October 22, 2011

Carlyle Monetizes Diversified Machine

The Carlyle Group sold one automotive supplier, as it works to acquire several others, Cooper Standard and TI Automotive. Crain's Detroit Business reported:

Beverly Hills, Calif.-based private equity firm Platinum Equity has acquired Howell-based aluminum and iron castings supplier Diversified Machine Inc., unnamed sources told Crain's.  Financial terms of the deal were not disclosed.

Reports surfaced in August that its previous private equity owner The Carlyle Group was looking to unload Diversified Machine, looking to fetch more than $400 million.

New York-based Carlyle Group formed Diversified Machine in 2005 by acquiring all of the assets of Howell-based supplier UniBoring out of bankruptcy and adding assets from then-bankrupt Metaldyne and Hayes-Lemmerz.

Carlyle lists both Diversified Machine and Metaldyne as affiliates.  DMI took on Metaldyne's chassis business and Spanish operations in 2009.  Both DMI and Mataldyne have production sites in China, Carlyle's favorite low cost part of the globe.

Carlyle leeched Metaldyne via an $88 million special dividend, financed by floating $225 million in debt.  Now it's ready to monetize DMI.  One has to wonder what kinds of conversations took place between Carlyle's co-founders and GM's CEO Daniel Ackerson, a former Carlyle Managing Director. Did Ackerson indicate where the growth niches are in the automotive segment?

Was it just time to cash in?  It's the PEU way.  (PEU stands for private equity underwriter.)

Update 5-7-12:  WaPo used Diversified Machine to wax poetic on the virtues of PEU's.  Value, resale, bag holder, it's all in the eye of the beholder.