KPS Special Situations Funds, a New York firm specialising in distressed assets, acquired two auto parts companies today. Financial terms were not disclosed.
The first, Ft. Smith, Arkasas-based Cloyes Gear and Products, is a supplier of timing systems and components for automotive engines and operates under the Cloyes and Dynagear brand names. Cloyes is one of only four global providers that provide design, engineering, manufacturing and supply chain management for the timing system in engines. The company operates four manufacturing facilities in the United States, a manufacturing joint venture in Germany (Cloyes Europe GmbH) and three distribution/system assembly facilities in North America.
The family-owned company was purchased from the Myer family, who will maintain a minority interest. Trevor Myers will continue to serve as CEO under KPS’ ownership.
In the second transaction, KPS portfolio company Blue Water Automotive Systems has acquired the automotive business of Injectronics, which manufactures thermoplastic components and assemblies for a variety of industries. The automotive business’s products include air flow ducts, air exhausters, fender liners, and functional and interior trim. The company’s customers include General Motors, Daimler-Chrysler and Air International.
Blue Water Automotive Systems was acquired by KPS in September of 2005.
Raquel Vargas Palmer, a principal with KPS who led the Cloyes deal, said while these companies are both profitable they also fit KPS’ investment pattern because they are in a distressed sector.
“We look for distressed companies that have a reason to exist, that have plans that we can put in place to improve business,” she said. “In the automotive space there’s a lot of chaos, but we see a lot of opportunity there. In Cloyes, we saw a company that has room for improvement on the operational side.”
Vargas Palmer said those improvements will include restructuring Cloyes’ budget and expanding its European operations.
David Shapiro, a managing principal of KPS who led the Injectronics’ deal, said a key part of the firm’s strategy is finding the diamonds in the rough of this troubled area.
“When sectors become out of favor, which is clearly the case with automotive today, the good and bad get painted with the same brush,” he said. “We’re looking at which ones are the ones that really should exist and are being unfairly penalized for the sector.”
KPS also has a third portfolio company in the automotive sector, Jernberg Industries, which is involved in steel forging. KPS acquired that company in August 2005.