The sale of Ascensus Inc. has produced a big win for J.C. Flowers & Co., the once mighty private equity firm that is reportedly considering restructuring its second fund. Genstar Capital and Aquiline Capital Partners said Sept. 28 they agreed to buy Ascensus.
Financial terms weren’t announced but two banking sources pegged the sale at $800 million to $850 million. However, a third source said Ascensus sold for more. The sale to Genstar/Aquiline is expected to close in fourth quarter.
Genstar and Aquiline are splitting the investment equally, sources said. Each firm will own 50 percent, sources said. Flowers put the company up for sale in May, seeking bids of $1 billion. Deutsche Bank advised on the sale. Ascensus, which is based in Dresher, Pennsylvania, is a retirement plan provider. The company produces $80 million in EBITDA. PE HUB reported in August Genstar and Aquiline had joined together to bid for Ascensus.
In April 2012, Flowers sold about two-thirds of the company — mainly Crump’s life and property and casualty insurance operating divisions — to BB&T Corp. for $570 million. Flowers kept the Ascensus retirement services unit. Flowers later in 2012 tried to sell the remaining Ascensus. At the time, the much smaller company, which produced about $25 million to $35 million in EBITDA, was expected to fetch $300 million.
Ascensus was in talks with a PE firm, but Flowers pulled the deal, PE HUB has reported. By holding on to the company, Flowers generated a stronger return. Ascensus in January paid out a $100 million dividend to its owners, including Flowers. The current sale of Ascensus to Genstar/Aquiline is considered “a massive homer for Flowers,” one of the banking sources said. Flowers was founded by J. Christopher Flowers, the former Goldman Sachs executive who was once considered the most successful investment banker ever. Bad bets in financial services, especially Flowers’ investment in MF Global (the futures broker went bankrupt in late 2011), put a damper on prospects.
The firm is reportedly considering restructuring its 2006 fund. Flowers wants to extend the life of the pool and possibly get cash out, Bloomberg News reported in August. Flowers raised $7 billion in 2006 for its second pool. Its third fund ended up at $2.32 billion in 2009, well short of its initial $7 billion target. JC Flowers II is generating a -12.4 percent IRR and 0.44x total value multiple as of June 30, according to the Oregon Public Employees Retirement Fund. Performance data for Fund III was not available.
Teaming up This is the second time Genstar and Aquiline have teamed up. In 2013, Aquiline and Genstar bought Genworth Wealth Management for $412.5 million. Genworth Financial Inc. was the seller. Genstar is using its seventh fund to invest in Ascensus. In August, Genstar Capital Partners VII closed at $2 billion. Genstar, of San Francisco, targets sectors including financial services, software, healthcare and industrial technology.
Performance data for Fund VII was unavailable. While Genstar has finished fundraising, Aquiline is currently “topping off” its third fund, a placement agent said. The New York-based private equity firm, which invests in sectors such as insurance, banking, asset management and financial technology, is seeking $1 billion for Fund III. Aquiline has so far collected about $900 million, the placement source said. Jane Gladstone, Chuck McMullan, Ken Auspaker, Eric Martz, Seunghee Kang and Ryan Liu of Evercore advised Genstar/Aquiline.
In addition to Deutsche Bank, Jason Gurandiano, of RoGi Consulting, provided financial advice to Flowers/Ascensus. Executives for Flowers, Deutsche Bank, Aquiline, and Genstar declined comment. Action Item: J.C. Flowers & Co. can be reached at (212) 404-6800 Photo courtesy of Shutterstock
JC Flowers gets boost from Ascensus sale
Austin, Texas – vcfo, a specialized consulting firm that provides access to expert-level finance, HR, technology and operational support, and Revitalization Partners, an international business management and advisory services firm with expertise in corporate restructuring, bankruptcy support and advisory services, announced today a strategic relationship to expand operations.
The companies bring to market an integrated suite of finance, HR, technology, recruiting,, outsourcing and management consulting services to improve business performance and address emerging market trends.
This relationship enables vcfo to offer clients deeper capabilities in business reengineering and bankruptcy support including interim CEO and COO placements, while Revitalization Partners can now address a broader set of finance, HR, recruiting and technology needs.
“Our combined team is highly adept at providing C-level support and guidance during both growth and challenging business cycles. The ability to rapidly assess, shift and reengineer operational strategies and processes that impact bottom-line performance is crucial to the success of our clients and the long-term sustainability of their businesses – especially given the uncertainty of many markets in which they operate,” said Ellen Wood, CEO, vcfo. “Not only does the relationship with Revitalization Partners widen the totality of impact vcfo can deliver to transitioning organizations, provide critical paths to debtor-in-possession and assist companies in obtaining the appropriate financing for their business, but it underscores a shared commitment to continually evolve and expand our service portfolio to support clients at every stage.”
“Our engagements are about business optimization, restructuring and profitable growth,” said Al Davis and Bill Lawrence, co-managing members, Revitalization Partners. “Joining forces with vcfo will enable us to have a greater impact across client organizations, deploying a much broader set of solutions and talent that improves companies and prepares them for inevitable change.”
According to the Pew Research Center, 10,000 baby boomers per day will be reaching age 65 through 2030. Many of these individuals head family businesses. Assisting these business owners secure long-term value, redefine exit strategies, and transition management will provide additional growth opportunity for vcfo and Revitalization Partners.
“Since vcfo’s founding, we’ve worked with more than 2,500 clients to make their companies stronger and have always applied a 360° approach,” said Wood. “We don’t just work the numbers; we work the opportunities that contribute to growth and optimization for our clients. This relationship puts additional arrows in our collective quiver to deliver the outcomes clients want and need.”
Founded in 1996, the firm’s original core offering was fractional or part-time CFO services. The company’s services have long since evolved to include an integrated suite of finance, HR, technology and recruiting support, including outsourcing and consulting services that improve operational performance and optimize productivity. For more information, please visit https://www.vcfo.com.
About Revitalization Partners
Revitalization Partners is an international specialty management services firm that provides hands-on interim executive management and advisory services to client companies specializing in under-performing, turnaround, bankruptcy and workout situations as well as repositioning companies faced with changing market and funding situations. Revitalization Partners focuses on driving performance improvements and strengthening the overall position of the company. For more information, please visit http://revitalizationpartners.com/.
GemCap is pleased to announce the funding of a $5.9 million senior facility to a manufacturer of orthodontic products and supplies. The facility is comprised of a term loan secured by machinery and equipment and a revolver against account receivables and inventory.
GemCap’s facility provides the Company with cash availability for working capital to operate and grow their business.
Revitalization Partners was engaged by the Company to find a replacement lender for their existing credit facility and to maximize their borrowing availability.
“We were impressed by the flexibility that GemCap provided to close this loan.” said Bill Lawrence, Principal of Revitalization Partners.
Bill added: “We enjoyed working with GemCap and we are pleased that GemCap provided this facility for our client.”
“This is an innovative Company and we are excited to help support their growth”, said Richard Ellis, Co-President of GemCap.
GemCap is an asset-based lender specializing in inventory, equipment and accounts receivable loans from $500,000 to $10 million. .
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Pendleton Woolen Mills Announces New CEO
PORTLAND, Ore. (Feb 4, 2013) – Pendleton Woolen Mills, the Portland, Oregon-based company renowned for classic apparel and home products, announces today the appointment of Mark Korros , 61, as Chief Executive Officer.
Korros joins Pendleton after serving most recently as CEO and President of Seattle-based Filson, a leading outfitter for outdoor enthusiasts.
Korros brings 39 years of experience in leadership, brand development, product merchandising, direct marketing, e-commerce, and retail and wholesale sales.
Prior to Filson, Korros served as president at Samsonite and FranklinCovey. Additionally, he held senior executive positions at Reebok, Levenger and Healthtex Childrenswear.
“We are pleased to welcome Mark to the Pendleton family,” says Pendleton President Mort Bishop III, who represents fifth generation management of the family-owned and operated company.
“His strong communication style, entrepreneurial thinking, commitment, and vast experience will be instrumental in the continual building of our position as an American heritage brand.”
“I look forward to being associated with one of the country’s premier iconic names in apparel and home,” says Korros. “Few companies have such loyal and longstanding customers. What is even more exciting, is the large number of young people who are ‘discovering’ today’s Pendleton.”
Korros succeeds Pendleton CEO Bill Lawrence, who will remain in an advisory role during the transition.
“We thank Bill for his vision during his time with Pendleton,” Bishop adds. “His guidance and leadership over the last four years has led to a comprehensive global strategy for the company’s future growth.”
Setting the standard for classic American style, Pendleton is recognized worldwide as a symbol of American heritage, authenticity and craftsmanship. With six generations of family ownership since 1863, the company celebrates 150 years of weaving fabric in the Pacific Northwest in 2013. Pendleton owns and operates two of America’s remaining woolen mills, constantly updating them with state-of-the-art looms and eco-friendly technology. Inspired by its heritage, the company designs and produces apparel for men and women, blankets, home décor and gifts. Pendleton is available through select retailers in the USA, Canada, Europe and Asia, at Pendleton stores and through company catalogs and web site at www.pendleton-usa.com.
By Seattle Times business staff, Business & Technology
December 15, 2011
The receiver in charge of Skyway Luggage, owned by Seattle Metro Chamber of Commerce Chairman Henry “Skip” Kotkins Jr., sought court approval this week to sell its Western Avenue building as the first step in an “immediate liquidation” of the century-old company.
The receiver in charge of Skyway Luggage, owned by Seattle Metro Chamber of Commerce Chairman Henry “Skip” Kotkins Jr., sought court approval this week to sell its Western Avenue building as the first step in a planned liquidation of the century-old
Kotkins, Skyway’s chairman and CEO, placed the company in receivership in June, saying it was unable to pay its debts. Receivership, an alternative to bankruptcy, is handled in Superior Court and gives an independent official control of the company to maximize payment for creditors.
Skyway’s other assets include another property, accounts receivable and a 73-foot sailboat, according to court filings.
Alan Davis, the receiver, said he’s hopeful Skyway’s trademarks, customer accounts and other assets can be sold together “so the Skyway brand and everything continues.” There’s no timetable for completing the asset sales, said Davis, a turnaround expert at Revitalization Partners in Seattle.
A financial statement filed by Davis in August put Skyway’s assets at $26.7 million, including $14.7 million in a note due for a loan made by the company to an unnamed Skyway shareholder, evidently Kotkins. Its liabilities were $16.4 million.
John Rizzardi, an attorney for Kotkins, declined to comment on the case. Kotkins could not be reached. The receiver has a deal to sell Skyway’s downtown Seattle building at 2501 Western Ave. for $2.1 million in cash, documents say. The property secures a $9.3 million claim against Skyway by Wells Fargo Bank.
Skyway’s luggage, made in China under contract, is sold under brands including Eddie Bauer, Sigma3 and Vector.
China-based Harmony Travelware, a luggage manufacturer, in July claimed it is owed $6.1 million. The receiver argues that Harmony is an unsecured creditor and “it is unlikely unsecured creditors will receive a meaningful distribution.”
Skyway, according to its website, was founded in 1910 by Lithuanian immigrant A. J. Kotkins as Seattle Suitcase Trunk and Bag Manufacturing. Skip Kotkins began a one-year term as volunteer chairman of the chamber at its Sept. 16 annual meeting. He’s a director of building-services company ABM Industries and previously was a director of Cutter & Buck and Rainier Bancorporation, among others.
From the Puget Sound Business Journal: by Jeanne Lang Jones, Staff Writer
December 16, 2011,
Prominent Seattle businessman Henry “Skip” Kotkins Jr. is embroiled in a multimillion-dollar legal battle with the receiver he selected to sell his family’s struggling Skyway Luggage Co. and its assets to satisfy creditors.
The legal dispute arose out of a financial crisis that has hobbled the 101-year-old Seattle company credited with popularizing the wheeled suitcase.
The receiver, Revitalization Partners LLC, in early November filed a lawsuit in King County Superior Court accusing Skyway Luggage CEO Kotkins and other company executives of “excessive wages” and “failures … to exercise any management or control,” among other things, according to the complaint. The lawsuit also accused Kotkins of “unjustly enriching” himself with $14.9 million in personal loans.
Kotkins denied the allegations, arguing that the company was dragged down by market conditions, a dramatic industry consolidation, and that the temporary loans he received were common practice for a family owned business. Both sides agree that the company’s financial condition deteriorated and it needs to be sold.
Seattle-based Revitalization Partners, acting on behalf of Skyway Luggage’s creditors, is seeking at least $39.9 million from Kotkins, as well as at least $6 million each from two other company executives, according to the lawsuit. Kotkins, who chairs the Seattle Metropolitan Chamber of Commerce and is a director for the Seattle Branch of the Federal Reserve Bank of San Francisco, told the Puget Sound Business Journal he has done nothing wrong.
“I know what I did and why I did it, and I did not do anything wrong or illegal,” he said. “If I had, I wouldn’t have chosen to go into receivership. Why expose myself to any public document scrutiny if I had done anything wrong? “I have lived my whole life as an upstanding, contributing part of the community. Everyone knows me and my reputation is strong.” Kotkins’ attorney, John Rizzardi of Seattle law firm Cairncross & Hempelmann PS, said his client denies the allegations.
The receiver’s attorney, Michael Nesteroff, of Seattle law firm Lane Powell PC, declined to comment on the case. Whatever the outcome, the dispute is probably the beginning of the end of the Kotkins family’s ownership of Skyway Luggage, which was founded by Kotkins’ grandfather in 1910 and survived the Great Depression. Three generations of the Kotkins family have managed the company, which is now owned by Skip Kotkins and a family trust.
In recent years, the company made luggage under its own brand and under a manufacturing licensing agreement for retailer Eddie Bauer, among others.
The lawsuit and related documents, along with several interviews with Kotkins and other parties to the dispute, paint the picture of a third-generation owner who put his struggling company into receivership, only to have the receiver sue him and other executives for damages.
Kotkins said he put his own company into receivership in June, after Skyway Luggage foundered under the onslaught of a “perfect storm” of business reversals. The recession battered the company’s sales, one of its largest customers couldn’t pay its bills, and the company struggled with its main Chinese manufacturer over quality issues, he said. The recession has claimed a number of other wholesale luggage makers that have either closed or been sold to competitors as the industry consolidates.
The receiver, Revitalization Partners, specializes in business turnarounds, receiverships and bankruptcy and crisis support. Similar to a bankruptcy filing, receiverships in Washington state put litigation and collection proceedings on hold, but the procedure does not follow the same strict timelines as bankruptcy, allowing the receiver greater flexibility in selling assets.
Kotkins said he concluded that Skyway Luggage was worth more as a going concern, and should be sold as an intact business.
“Skyway going it alone as an independent company did not make sense,” Kotkins said. “It needed to be part of a larger operation. And, at my age and stage in life, it made sense to be a seller.”
But the lawsuit filed by the receiver painted a different picture of what was behind the company’s financial struggles. Revitalization Partners alleged in its lawsuit that it “was appointed due to Skyway’s mounting financial difficulties arising from the diversion of its working capital to fund excessive wages to Kotkins” and two other executives, William H. Wilhoit, the chief operating officer and president; and Jennifer Carmichael, the executive vice president and secretary.
Carmichael is Wilhoit’s daughter. Wilhoit, who joined the company in 1990, was appointed president in 2003. According to Kotkins, Wilhoit oversaw much of the company’s day-to-day management. Skyway Luggage’s performance was also compromised, the lawsuit alleged, by “personal loans” to Kotkins, as well as by “the failures of Kotkins, Wilhoit and Carmichael each to exercise any management or control over the corporation’s business.”
“The company now faces potential liquidation because of its lack of working capital and inability to access credit,” the lawsuit said. The attorney for Wilhoit and Carmichael, Chris Nicoll, of Nicoll, Black & Feig PLLC in Seattle, said, “Bill and Jennifer are capable and competent executives. They sought out and relied upon the advice of professionals and we will be providing our defense in due course.” Kotkins said of the allegations: “Anybody can say anything they want in a complaint, and they usually do.”
Revitalization Partners is asking for a judgment of at least $25 million against Kotkins and $6 million each against Wilhoit and Carmichael, alleging breaches of fiduciary duty, waste of assets and unjust enrichment. The receiver is also seeking a judgment of $14.9 million for amounts owed on a series of loans Kotkins obtained from the company between 2006 and 2010.
In detailing its claims against Kotkins, Wilhoit and Carmichael, the receiver put forth its scenario of the company’s decline.
Between 2006 and 2010, the company’s gross sales plunged 69 percent — from $46.6 million to $14.6 million — and the company became insolvent, the receiver contends in its lawsuit.
In his answer to the complaint, Kotkins denies the company was insolvent in 2007, claiming it had a net worth of close to $20 million at that time. He admitted that Skyway Luggage’s financial condition deteriorated between 2007 and 2010, but denied that the decline was the result of his taking loans from the company.
Instead, he said “the greatest cause of Skyway’s deteriorating financial condition … was the drop in value of Skyway’s marketable securities portfolio,” which was “the primary contributor to Skyway’s inability to pay its vendors.”
The securities portfolio was later surrendered to the company’s bank. Kotkins also “denies that he failed to exercise appropriate supervision and control over Skyway’s officers and employees,” his answer to the complaint said. Meanwhile, the receiver claimed the company paid $5.3 million in dividends to Kotkins that was used to pay off unspecified prior loans, according to the lawsuit.
Kotkins’ lawyer, Rizzardi, points out that for Subchapter S corporations, such as Skyway Luggage, shareholders are responsible for paying the company’s taxes and that distributions are commonly made for that purpose. In October, Revitalization Partners told the court it had a plan for selling Skyway Luggage and its assets, and had received an offer on one of the company’s properties.
Revitalization Partners’ Al Davis said he believes the Skyway Luggage brand name will survive. “Our objective always is to maximize the value of the assets, and Skyway is an iconic brand,” he said. “I believe we will be successful in having it survive.”
In mid-November, with the holiday shopping season nearing, the court authorized the receiver to sell certain Skyway inventory for approximately $1.3 million.
Kotkins and his company face other challenges. In July, Kotkins and his wife, Jacqueline, gave Columbia State Bank their home in Seattle’s Magnolia neighborhood with a deed in lieu of foreclosure. Kotkins said the couple, as empty nesters, had wanted to downsize to a smaller residence. They had been trying to sell their home for 16 months and had dropped the price by 40 percent when they contacted the bank about taking the deed, he said.
“We initiated that idea and they agreed,” said Kotkins. “We are very pleased that this allowed us to move to a smaller residence, as so many couples do at our stage in life.” The house is currently listed for sale for $4.9 million, according to the online listing service Zillow.com.
In November, Wells Fargo Bank sued Kotkins personally for $9.5 million in King County Superior Court, claiming he unconditionally guaranteed a series of loan agreements between Skyway Luggage and Wells Fargo that were not repaid.
Wells Fargo’s attorneys did not return calls for comment on that case. Rizzardi said it was “unfortunate” that Wells Fargo took legal action rather than being willing to wait for the assets to be sold.
Skyway Luggage’s main manufacturer and largest unsecured creditor, Suzhou Harmony Travelware Co. Ltd. in China, claims it is owed about $6 million, said Harmony’s attorney, Dean Messmer of Seattle law firm Lasher Holzapfel Sperry & Ebberson PLLC. According to a declaration that’s part of the court file in the receiver’s lawsuit, Skyway Luggage made its last payment to Harmony in May, when the Chinese manufacturer stopped shipments. At the time, Harmony claimed it was owed about $4.4 million for shipped orders.
“We are waiting to see the results of the receiver’s liquidation of assets and the receiver’s lawsuits against Mr. Kotkins and the other officers of the company,” said Harmony’s attorney Messmer. “If he is successful, my client will be repaid in full.”
Rizzardi said Harmony’s claims are in dispute.
“Our understanding is the receiver wants to complete the receivership as quickly as possible,” Rizzardi said. “It will sell the assets, possibly resolve the lawsuit in mediation and obtain a decision on the disputed Harmony claim in coming months.”
Meanwhile, Kotkins is working on selling his family’s company with Davis, the receiver, who is simultaneously suing him in King County Superior Court.
Davis said: “This is a business problem. It is not a personal problem.” “It is a strange situation,” Kotkins said. “I’ve got someone who is suing me and I’m working closely with them every day.”
A Three-Generation Endeavor
The legal battle between Henry “Skip” Kotkins Jr. and the court-appointed receiver for his business, Skyway Luggage Co., is the greatest challenge yet for a family that has weathered crises through three generations.
The Seattle-based company was founded in 1910 by Kotkins’ grandfather, Abe Kotkins, a Lithuanian immigrant, as Seattle Suitcase, Trunk and Bag Manufacturing Co., according to a history on the Skyway Luggage website. Abe Kotkins built the business for a quarter century, then struggled to keep it afloat during the Great Depression. He died of a heart attack at the age of 49, reportedly having worked himself to death.
His son, Henry Louis Kotkins, was a year out of law school when he stepped in to save the family business in 1936. He was an innovator, renaming the company Skyway Luggage to capture the excitement of the growing airline industry. He rolled out colored luggage at a time when most baggage was a somber black or brown.
Henry Louis Kotkins also had an active civic life. He served as a Port of Seattle commissioner for 13 years, helping forge a relationship with China. That nation has since become one of Washington state’s largest trading partners. He was a devoted Rotarian and on the committee that helped stage the 1962 Seattle World’s Fair. He died in 2002, according to newspaper obituaries.
His son, Henry “Skip” Kotkins Jr., joined the company full time in 1972 and became CEO and chairman of the company in 1980. He, too, has a long résumé in civic affairs. Henry “Skip” Kotkins Jr. is currently chairman of the Seattle Metropolitan Chamber of Commerce and a director for the Seattle Branch of the Federal Reserve Bank of San Francisco. He is also past president of the Rotary Club of Seattle, past chair of the Washington Council on International Trade, and a former trustee of the Fred Hutchinson Cancer Research Center.