American Securities front runner for Carlyle, KPS auto assets


By Greg Roumeliotis and Soyoung Kim

NEW YORK, Sept 28 (Reuters) - American Securities LLC is in the lead to buy auto parts suppliers from Carlyle Group LP and KPS Capital Partners LP, in deals that could collectively top $1.5 billion, people familiar with the matter said.

Private equity firm American Securities is in advanced stages of negotiating the acquisition of U.S. auto parts supplier Metaldyne from Carlyle for over $800 million, the people said on condition of anonymity because discussions are confidential.

Linamar Corp, Canada's second-largest auto supplier, which also made an offer for Metaldyne, remains in contention for the business, and Carlyle may still choose to sell to Linamar, the people cautioned.

New York-based American Securities is also in advanced discussions to buy HHI Group Holdings, which makes forged parts, wheel bearings and powdered metal engine and transmission components for the automotive and industrial sectors, from KPS Capital Partners for more than $700 million, the people added.

Carlyle and KPS declined to comment while American Securities did not respond to a request for comment.

Following a turbulent year in the financial markets in 2011, private equity firms are taking advantage of recovering debt markets to exit investments, by selling assets to other private equity firms that can now raise financing more easily. ID:nL5E8KK015]

The two deals represent significant equity commitments for American Securities, which in June announced it had raised $3.64 billion for its sixth private equity fund, more than 50 percent over the capital amassed for its fifth fund.

American Securities is an active investor in manufacturing and industrials space and is looking to make major forays into the auto industry at a time when auto sales show signs of recovering to pre-recession levels.

Successful acquisitions of both Metaldyne and HHI Group could allow American Securities to generate synergies from economies of scale in the auto supply industry.

Plymouth, Michigan-based Metaldyne is projected to have $150 million to $160 million in earnings before interest, tax, depreciation and amortization (EBITDA) in 2012, according to people familiar with the matter.

Metaldyne now boasts about $1 billion in annual revenue and more than 4,000 employees. Its customers include all major automakers, including General Motors Corp, Ford Motor Co , Chrysler Group LLC and BMW AG.

HHI, which stands for Hephaestus Holdings Inc, has EBITDA of about $150 million, the sources added. The Royal Oak, Michigan-based company also boasts MC Capital Inc, a subsidiary of Mitsubishi Corp, as an investor, according to KPS's website.

HHI is the largest independent manufacturer of highly engineered symmetrical and asymmetrical forged parts for various power train and wheel-end applications. It is also a leading manufacturer of wheel bearings and one of the few manufacturers of engine-timing drive systems for the North American automotive industry, according to the KPS website.



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