Going private: Many of Jacksonville's biggest companies owned by private equity firms
In a few months, Web.com Group Inc. will be the latest Jacksonville-based company to be taken over by a private equity firm.
Affiliates of Siris Capital Group have agreed to spend more than $2 billion to buy the website services company. Another firm may come in with a higher bid but regardless of who makes the highest offer, Web.com will become privately owned.
Only 15 companies headquartered in Northeast Florida are traded on major stock exchanges and a handful of others are traded in over-the-counter markets.
But research from private equity data firms PitchBook Data Inc. and S&P Capital IQ shows there are about 125 to 150 companies backed by investment sponsors.
“Private equity is multiple times the public companies,” said Don Wiggins, president of Heritage Capital Group in Jacksonville.
A midyear report by PricewaterhouseCoopers said there are nearly 8,000 private equity-backed U.S. companies, doubling the fewer than 4,000 firms traded on the major stock exchanges.
Private equity-backed companies include some of Jacksonville’s largest corporations, like Southeastern Grocers LLC, (operator of the Winn-Dixie supermarket chain), and sales and marketing firm Acosta. These businesses are backed by major investment firms with billions of dollars to spend.
However, most of the businesses are smaller and funded with different levels of investors. New businesses may be backed by so-called angel investors.
“For angel investors, it’s primarily local,” said Wiggins. “It’s kind of a friends and family situation.”
Other startup businesses are funded by venture capital firms, “companies that have been formed to invest in early-stage companies,” Wiggins said.
Jim Stallings, CEO of PS27 Ventures in Jacksonville, has helped fund a number of small businesses in the area with venture capital.
Stallings said there aren’t a lot of companies in Jacksonville like his that would describe themselves as venture capital firms, but he is seeing more investor interest in funding new companies.
“The angel network is getting more organized in Jacksonville,” he said, with potential investors joining clubs to identify potential targets.
Many of the investors are retired executives with money available and years of expertise to offer a startup, Stallings said.
“There’s millions of dollars of capital that comes in through that network,” he said.
But it’s not easy. Stallings said investors shouldn’t provide funds they can’t afford to lose.
“This is risk capital. They all know it,” he said.
Big money private equity firms search for companies that already have a strong revenue stream but have room for more profitability, Wiggins said.
“In real estate it’s location, location, location. For private equity it’s grow, grow, grow,” he said.
Employees may fear job cuts as big investors come in, but Wiggins said his experience with corporate buyouts shows it doesn’t usually happen that way.
“They never come in and slash and burn,” he said.
“They want to accelerate the growth. They want to make it more profitable.”
Area private equity-backed companies
The Jacksonville area is home to about 150 companies backed by private equity interests. Many of them are small companies not followed closely, but the list includes several prominent Jacksonville companies.
Interline Brands, which markets and distributes maintenance, repair and operations products, is owned by publicly traded Home Depot Inc. But over the years, it has gone back and forth between public and private ownership.
The company opened in the 1950s under the name Barnett Brass & Copper and went public in 1996 under the name Barnett Inc. In 2000, it was acquired by Wilmar Industries, soon after a group of private equity firms had taken over Wilmar.
The merged company was headquartered in Jacksonville and renamed Interline in 2001.
In 2004, the private equity firms decided to take Interline public, a common way for buyout firms to cash out in their investment after growing a business they acquired.
Interline was publicly traded for eight years before a buyout in 2012 by Goldman Sachs Capital Partners and P2 Capital Partners.
The two private equity firms paid $1.1 billion for Interline but sold it to Home Depot in 2015 for $1.625 billion, making a half-billion-dollar profit in three years.
Interline’s last financial report as an independent company showed revenue of $859 million in the first half of 2015.
Winn-Dixie Stores Inc. was a publicly traded company before it was acquired by Bi-Lo LLC for $560 million in 2012. Bi-Lo was owned by private equity firm Lone Star Funds, which paid $660 million for that supermarket chain in 2005 and contributed $275 million in additional capital to help Bi-Lo buy Winn-Dixie.
After the acquisition, Lone Star merged the two companies into a Jacksonville-based company called Southeastern Grocers LLC.
However, that deal didn’t work out well for Lone Star. Southeastern went through a Chapter 11 bankruptcy reorganization this year that wiped out Lone Star’s equity in the company.
Southeastern still is privately owned, after it issued equity to holders of $522 million in debt in the reorganization. Court documents show that Fidelity Management & Research Co. and Osterweis Capital Management were in line to be major equity holders after Southeastern emerged from bankruptcy in May, but there has been no specification of how the stock was distributed.
Southeastern is Jacksonville’s largest private equity-backed company with $9.875 billion in sales last year, according to court filings. After store closings in the reorganization, it projects $8.45 billion in sales in 2019.
CEO Anthony Hucker is hoping that upgrades in progress of the company’s stores will bring in more sales.
Acosta Sales & Marketing is a 90-year-old Jacksonville company that has become a powerhouse in its field, providing services mainly for the supermarket industry.
Several private equity firms have profited from Acosta’s growth through the years.
Most recently, The Carlyle Group acquired control of Acosta in a 2014 deal valued at $4.8 billion, including the assumption of debt.
Carlyle bought the majority stake from another buyout firm, Thomas H. Lee Partners L.P., which bought its stake in 2011. Although the price was not disclosed, Bloomberg News reported THL paid $500 million and sold its interest to Carlyle three years later for $1.7 billion.
Acosta does not disclose sales figures but data from Florida Trend magazine shows Acosta was Jacksonville’s second-largest private equity-backed company with $2.1 billion in revenue last year.
Acosta last month brought in Alejandro Rodriguez Bas, former executive vice president of C&S Wholesale Grocers, as its new CEO.
Fanatics started in 1995 as a sports merchandise store in the Orange Park Mall and has grown into a major online retailer of sports-related apparel and merchandise with annual sales of about $2 billion.
Its growth has attracted interest from private equity.
The company was acquired for $277 million in cash and stock in 2011 by GSI Commerce Inc. and the next year, GSI Chairman Michael Rubin combined the Jacksonville-based company with other businesses he owned into a company called Kynetic.
Last year, an investment company formed by Japanese conglomerate SoftBank Group Corp. called the Vision Fund made a $1 billion investment in Fanatics. Financial news services reported that investment valued the entire company at $4.5 billion.
Fanatics CEO Doug Mack has said the Softbank relationship will help the company expand internationally.
APR Energy was attracting international notice for its business of building fast-tracked power plants in emerging markets. However, two years of losses because of projects in risky countries that had to be abandoned forced the publicly traded company to seek private equity help.
A consortium of private equity investors bought the Jacksonville-based company for about $250 million in January 2016 and agreed to provide $200 million in new capital after the buyout.
The investor group included a firm run by former U.S. Secretary of State Madeleine Albright. APR Chief Executive John Campion said Albright’s involvement has helped the company’s credibility, assuring business partners that the company conducts business properly.
APR reported revenue of nearly $500 million in 2014, its last full year before agreeing to the buyout in late 2015.
Beeline is a software company started by Jacksonville-based staffing company Modis Professional Services Inc. in 1999. When the parent company, then called MPS Group Inc., was acquired in 2010 by Adecco Group NA, Beeline went with it.
Beeline became an independent company in late 2016 when a Chicago-based private equity firm called GTCR bought the business from Adecco. GTCR merged Beeline with a company that it owned called IQN.
The merged company, which provides software solutions that help companies manage their nonemployee workforces, changed hands again last month when New York-based New Mountain Capital bought Beeline.
Terms were not announced but according to New Mountain’s website, the firm makes just three or four private equity investments every year, at prices between $100 million and $500 million.
“With a robust history of supporting and growing software companies as well as companies in the human capital ecosystem, New Mountain is an ideal partner for us,” said Beeline CEO Doug Leeby