Brentwood Associates Announces the Formation of HDA Parts System Inc.
10 August 1998
Brentwood Associates Announces the Formation of HDA Parts System Inc.
LOS ANGELES--Aug. 7, 1998--Los Angeles-based Brentwood Associates announced the formation of HDA Parts System Inc. (HDA Parts), a leading consolidator in the heavy-vehicle-replacement- parts industry.
In June, Brentwood completed two platform acquisitions to create the largest heavy-vehicle-parts distributor in the Southeast and the fourth largest nationally. According to Chris Laurence, a general partner at Brentwood, the transaction is the firm's fifth investment in Brentwood Associates Buyout Fund II, L.P. The specific terms of the two transactions were not disclosed.
Brentwood also announced that HDA Parts has completed a $100 million senior subordinated notes offering. The company used proceeds from the financing to repay borrowings under the existing senior credit facility and reserved the balance for future acquisitions.
Financing for the initial transactions came through a $75 million senior revolver and equity contributed from Brentwood's $240 million fund.
In addition, Brentwood announced the appointment of John Greisch as chief executive officer of the company. Greisch joined HDA Parts from The Interlake Corp., an $800 million global industrial equipment manufacturer, where he was most recently president of the Material Handling Group, Interlake's largest operating unit with $475 million in revenue.
"We are excited to partner with such a talented executive, and look forward to working with John to grow HDA Parts," noted Laurence. HDA Parts also added John Miller as chief financial officer. Miller was formerly CFO of Peapod Inc., the largest online grocery retailer.
On June 1, Brentwood purchased a controlling stake in City Truck and Trailer Parts through a recapitalization of the Birmingham, Ala.-based operator of 17 parts-distribution centers. With locations throughout Alabama, Georgia, Kentucky, Mississippi and Tennessee, City Truck also operates 13 machine shops, a remanufacturing business for drivelines, transmissions and rear axles, and an extensive brake-shoe- remanufacturing facility.
City Truck was founded in 1975 by Larry Clayton, president, who will remain with the company in a continuing operational role as well as on the board of directors.
Following the City Truck transaction, the acquisition of Stone Heavy Duty was completed on June 19. Based in Raleigh, N.C., Stone Heavy Duty operates 18 truck-parts distribution centers, three drive-in service centers and 14 machine shops in North Carolina, South Carolina, Tennessee, Virginia and West Virginia.
Stone Heavy Duty also operates a remanufacturing business for brake shoes, transmissions, axles, power steering and hydraulic components out of its headquarters facility in Raleigh.
Stone Heavy Duty was founded in 1952, and is led by Fred Stone, chairman and CEO, and Jim Stone, president, both of whom will remain with the company following the close of the transaction.
"We are excited about the opportunity to join forces with City Truck, as well as Brentwood Associates, and to use Brentwood's expertise in growing businesses to embark on a new phase of expansion," said Jim Stone, who will also join the company's board of directors.
Following the broad, national trend of outsourcing noncore businesses, the trucking and truck-leasing industries are increasingly turning to independent providers of parts and service for heavy-duty trucks.
"As outsourcing becomes more common among fleet operators, independent garages and independent parts distributors with service capabilities are becoming the provider of choice for parts and service," noted Greisch.
"Particularly with smaller- to medium-sized fleets, it has become clear that those fleets are looking to outsource a significant portion, if not all, of their service or parts inventory functions for their trucks.
"With its breadth of inventory, number of locations and quality of employees, HDA Parts has been able to capitalize on this growing business and provide fleets with the highest level of customer service."
The company targets various-sized fleets of heavy-duty trucks, which are typically defined as vehicles over 19,501 lbs. GVW, or Class 6, 7 and 8 vehicles.
Brentwood, a firm specializing in growth build-ups, intends to accelerate the growth of the company through both internal investment and acquisitions of geographically complementary businesses.
"We believe that the company's historical growth, while impressive, can be augmented by the availability of new capital. The company's management depth, its track record of providing excellent customer service and its widely recognized brand name, position City Truck and Stone Heavy Duty to serve as an excellent platform for future growth," said Laurence.
"Together with John Greisch and the management teams of City Truck and Stone Heavy Duty, we will be actively seeking additional strategic distributors with which to partner."
Laurence added that the company is currently in negotiations with numerous additional acquisition candidates and expects to consummate several add-on acquisitions in the near future.