Compass Diversified (CoDi), the Connecticut-based owner of several sporting goods brands, including Boa Technology, 5.11, Marucci Sports and Velocity Outdoor, announced that it has entered into a definitive agreement to acquire the equity of PrimaLoft Technologies Holdings, Inc, the parent company of the PrimaLoft business and brand, at an enterprise value of US$530 million (excluding working capital and certain other closing adjustments).
PrimaLoft, based in Latham, New York, was founded in 1983 by Albany International Corporation in response to a request from the U.S. Army to develop synthetic insulation for soldiers that mimics the warmth and weight characteristics of traditional goose down but remains warm even when wet. The PrimaLoft synthetic insulation portfolio not only offers high performance in wet conditions but also products that can mimic the aesthetics of natural down and provide the freedom to design garments that range from stylish buffers to lightweight, functional clothing. PrimaLoft insulation offers its brand partner better economics and enables better sustainability properties through the use of recycled, low-carbon raw materials. Today, PrimaLoft holds more than 90 global patents and serves more than 950 active brand partners, including Patagonia, Nike, Stio, La Sportiva, Polo Ralph Lauren, Helly Hansen, Marmot, Moncler and Canada Goose. PrimaLoft had been owned for the past five years by a group of investors led by Victor Capital Partners, which acquired the company in 2017 from Prudential Capital Group, which had again acquired the PrimaLoft product division from its original parent company Albany International in 2012.
PrimaLoft sales totaled US$76 million in the last 12 months. Sales have grown at a CAGR of 16 percent since 2017, including a year of decline in 2020. The current geographic sales mix is 63 percent North American brands, 30 percent European brands, and the remainder Asian brands. The company is highly profitable, generating Ebitda of US$32 million over the same period, representing an average Ebitda margin of 40 percent, and has strong free cash flow. Due to outsourced production, capital expenditures are very low at less than 1 percent of sales, and production facilities are located close to customer factories. Working capital is negative. Valuation is about 16.5 times TTM Ebitda.
Management will contribute about US$35 million – 30 percent of the proceeds from the transaction – to the company and retain about 9 percent of the equity, while CoDi will pay US$495 million for the balance. CoDi will fund the entire purchase price with its US$600 million revolver, leaving a headroom of about US$105 million without having to exercise the US$250 million up-size option. Upon completion of the transaction, the new parent company will have a debt-to-equity ratio of approximately 4.1 based on its total debt of US$1.8 billion.
Mike Joyce, president and CEO of PrimaLoft, commented, “I am incredibly proud of PrimaLoft’s success with Victor Capital Partners and am thrilled to be partnering with CODI, who shares our commitment to building a sustainable future through innovation. We believe PrimaLoft is well-positioned to continue its purpose to unleash the full potential of people, products, and the planet as we address the need for sustainable product innovations in the apparel industry and beyond.” Since its founding in 1983, PrimaLoft has expanded its product line with innovations such as recycling PET plastic bottles, low-carbon P.U.R.E. manufacturing technology, and ThermoPlume, a down-like product. With its Relentlessly Responsible™ mission, PrimaLoft also strives to balance innovation, performance and sustainability.
The transaction is expected to close in July, subject to customary closing conditions. William Blair & Company, along with Baird, acted as lead financial advisors to PrimaLoft (a portfolio company of Victor Capital Partners). Jefferies LLC acted as an exclusive financial advisor to CoDi. Following the closing of the transaction, PrimaLoft will continue to be managed by its current leadership team.
