U.S. Markets close in 2 hrs 7 mins

American Capital Offloads Aptara

Zacks Equity Research

Last week, American Capital Ltd. (ACAS) announced the divesture of its portfolio company Aptara Inc. iEnergizer Limited acquired the unit in early-February 2012 for $144 million. This is the first company in 2012 that American Capital has sold out among its portfolio companies.

Aptara leads market in providing end-to-end outsourced multi-channel content production and digital media solutions. Aptara's services include content creation and design, new media enhancements, technology solutions and multi-channel distribution. Aptara provides services across multiple industries, including financial, education, legal, automotive, technical, trade and life sciences.

In August 2005, American Capital made initial senior and junior subordinated debt and convertible preferred equity investment of $45 million in Aptara for supporting the company’s recapitalization. Later, the company and its associates made further investments of $50 million in Aptara to support its growth.

Out of the proceeds, American Capital and its associates received $134 million, subject to post-closing adjustments, out of which about $108 million was solely received by American Capital. The company has earned 17% compounded annual rate of return over the life of its total senior, mezzanine debt and equity investments, including interest, dividends and fees.

Despite economic downturn, with the financial support from American Capital, Aptara expanded in digital publishing and content transformation industry. It improvises value-added services for its customers and is successfully foraying into new market verticals. Aptara is well positioned for continued growth in the future, given the production of eBooks and digitization which is in seed stage.

American Capital considers the deal to be positive for the company based on its returns from the sale and expects to continue seeking new One-Stop Buyout opportunities of up to $300 million. The company will also look for lending opportunities from $10 million to $100 million.

iEnergizer Limited is an international Business Process Outsourcing (BPO) company. It leads globally as a provider of third-party integrated business process solutions. This acquisition has uplifted iEnergizer's capabilities in content production and digital media solutions markets. Moreover, the buyout has broadened its customer base. The firm invests in high quality companies and associates with management to help build their businesses.

Therefore, iEnergizer's experience and ongoing growth in international market will facilitate Aptara to further grow in the industry and maintain market share. Additionally, iEnergizer is expected to gain from cross-selling opportunities and economies of scale of the combined operations. Furthermore, the acquisition will help iEnergizer to fulfill its objective of maximizing the value of investments by concentrating on businesses where it has substantial operating and investment experience.

Also, in 2011, American Capitaldivested its portfolio companies including VP Acquisition Holdings Inc. (Value Plastics) and CIBT Solutions Inc. (:CIBT). CIBT was acquired by ABRY Partnersfor $215 million in mid-December, while Nordson Corporation (NDSN) acquired Value Plastics for $250 million in August.

American Capital is a publicly traded private equity firm and global asset manager. It directly and through its asset management business, initiates, underwrites and manages investments in middle-market private equity, leveraged finance, real estate and structured products. Since American Capital's 1997 IPO, through the fourth quarter of 2011, the company has earned 29% compounded annual return on the exit of its equity investments, including dividends, fees and net gains.

The company has the ability to provide flexible financing solutions ranging from a variety of senior debt and uni-tranche to mezzanine and equity co-investments. Further, American Capital provides multi-currency funding with underwriting platform globally and facilitates the growth of portfolio companies. Such benefits provided by the company recommend private equity clients to consider it as an investment partner, which in turn helps the company to grow.

American Capital currently retains its Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Considering the fundamentals, we are maintaining our long-term ‘Neutral’ recommendation on the stock.

Read the Full Research Report on ACAS

Read the Full Research Report on NDSN

Zacks Investment Research

More From Zacks.com