By Shasha Dai
Of DOW JONES LBO WIRE
Clayton Dubilier & Rice LLC and Goldman Sachs Group Inc.'s (GS) GS Capital Partners have agreed to acquire home health-care products distributor HGI Holdings Inc. from Jordan Co.
The purchase price is around $850 million, including debt, said a person familiar with the matter.
CD&R is taking a majority interest in HGI, the person said. Certain members of HGI's management will roll over their equity interest, said another person familiar with the deal.
Cleveland-based HGI operates a mail-order business that provides about 30,000 medicines and medical devices in product categories including ostomy, diabetes and wound care. It has two divisions: Edgepark Medical Supplies and Independence Medical.
Jordan Co. acquired a majority stake in HGI, then known as Harrington Holdings Inc., in 2007 for an undisclosed sum from the Harrington family.
Since then, HGI's revenue has grown about 15% to 20% per year, and its Ebitda more than doubled, said one person familiar with the company. It also significantly paid down the debt associated with its 2007 buyout.
Chief Executive Ronald Harrington and the rest of HGI's management team will remain in place after the deal closes.
Adam Max, a managing principal of Jordan Co., attributed the company's growth in part to demographic trends including an aging population. Max also said that another key to HGI's growth is its management team, which helped diversify the company's product lines and geographic footprint.
Feeling that time was right for realizing the investment, Jordan Co. hired Jefferies & Co. to run a process.
The deal is the latest in a string of secondary buyouts announced over the last few months. Some of the larger deals include BC Partners Ltd. and SilverLake's $3.1 billion acquisition of company MultiPlan Inc. from Carlyle Group and Welsh Carson Anderson & Stowe; and TPG Capital LP's purchase of software vendor Vertafore Inc. from Hellman & Friedman LLC and JMI Equity for $1.4 billion. GS Capital was involved in another secondary buyout, closing a $1.7 billion takeover of Michaels Foods Inc. from Thomas H. Lee Partners in June.
Secondary buyouts have historically raised the question of whether there is still upside in the company that has been passed from one set of financial sponsors to another--sometimes repeatedly.
Max said he believes there is still plenty of room for growth at HGI. "The macro-economic forces at play for Harrington, such as the changing demographics and the increasing chronicle diseases, are supporting a high level of growth of the company."
One person familiar with the deal said that given CD&R's experience running distribution companies, the new sponsors have identified areas for additional growth at HGI, such as sourcing, and customer and product mix. Plans are also in the works for developing a private label business, this person said.
(Dow Jones LBO Wire covers news about private-equity buyouts)
-By Shasha Dai, Dow Jones LBO Wire; 212-416-2037; email@example.com