Global investment firm The Carlyle Group and private equity firm Stellex Capital Management have agreed to acquire and merge shipbuilder Vigor Industrial LLC, Portland, Ore., and MHI Holdings LLC, a ship repair and maintenance company based in Norfolk, Va.
The combination will create a bicoastal company involved in ship repair services and commercial and defense-related fabrication services. Key customers include the Navy, Coast Guard, Military Sealift Command, Boeing, cruise lines, fishing fleets, barges and ferry services for local and state governments, and other key commercial and defense customers.
The transaction is subject to customary closing conditions and is expected to close by the end of the third quarter 2019. Financial terms were not disclosed.
The Carlyle Group will become majority owner of the combined company. Equity for the investment will come from the Carlyle U.S. Equity Opportunity Fund II, a $2.4 billion fund that focuses on middle-market and growth companies in the U.S. and Canada. As part of the transaction, Stellex Capital, MHI’s existing owner, will contribute new equity to the platform, while Vigor’s CEO Frank Foti will roll a portion of his existing Vigor ownership stake into the combined company.
A CEO search is underway for the new company.
Tom Rabaut, former president and CEO of United Defense and a current operating executive at The Carlyle Group, and Adm. James Stavridis, a retired four-star Navy officer, former NATO Alliance Supreme Allied commander, and a current operating executive at The Carlyle Group, will both join the board of directors. Foti will also join the board as vice chairman and will continue as Vigor’s CEO until a new CEO is retained. Tom Epley will continue to lead the MHI business.
Vigor, majority-owned by CEO Frank Foti, is a provider of vessel fabrication and ship repair services. It employs 2,300 people and operates eight drydocks across the Pacific Northwest and Alaska, including the largest floating drydock in North America. No word on how many of these people will be retained by the new company.
“Through this transaction, Vigor gains responsible, forward thinking investors who will seek to build on our current platform while maintaining a values-driven culture,” Foti said in a statement announcing the sale. “In addition, we are excited to join forces with a company of MHI’s caliber which has a history of delivering strong results and shares our mission to serve the people who protect our country every day. This evolution takes us where we want to go, growing sustainable jobs into the future. I’m excited to be an investor in this adventure and to be a part of what’s to come.”
Latham & Watkins LLP served as legal advisor to The Carlyle Group and Stellex Capital Management. DLA Piper served as legal advisor to MHI Holdings LLC and Stellex Capital Management. BofA Merrill Lynch, BNP Paribas, and Credit Suisse have agreed to provide debt financing for the transaction. Capstone Headwaters served as exclusive financial advisor to Vigor Industrial LLC, and K&L Gates LLP served as Vigor’s legal advisor.
“MHI is stronger than it has ever been, and we’ve successfully executed our strategy of delivering cost effective maintenance and repair solutions to the U.S. Navy, a job we take very seriously,” Tom Epley, president and CEO of MHI, said. “We are excited to continue our partnership with Stellex and look forward to working with The Carlyle Group and our new colleagues at Vigor. The MHI leadership team and our 800 employees across MHI Ship Repair, Seaward Marine and Accurate Marine remain committed to our mission.”