2012Carlyle Unloads Media Wholesaler
By Peter Lauria
Published in The Daily Deal
July 7, 2003
Investors in Baker & Taylor Inc., including majority owner The Carlyle Group, will collect a $200 million windfall from the sale of the book distributor to Willis Stein & Partners.
Terms of the deal, announced late last week, call for Willis Stein to pay $255 million cash to absorb the Charlotte, N.C.-based supplier of books, DVDs and CDs to libraries and retail shops nationwide.
Carlyle bought Baker & Taylor in March 1992 from W.R. Grace & Co. for $105.7 million, putting up just $13.2 million in equity, according to financial statements. The Washington based private equity house recouped that outlay a year later, when Baker & Taylor paid a dividend.
The price Willis Stein is paying means $200 million in cash proceeds for Baker & Taylor investors, according to Philip Dolan, a Carlyle managing director, who added that the money will be pure profit.
"We've owned the company for a long time. It has gone through several iterations but we're pleased with the outcome," Dolan said.
Willis Stein is acquiring the unit during uncertainty for the book publishing industry. Despite the phenomenal success of recent Harry Potter and Hillary Clinton releases, sales are down across the industry. And the pressure on publishers and retailers to reverse the downward spiral increases with each entertainment choice introduced in the marketplace.
"Both publishers and retailers have had to change the way they do business to be competitive," said Marshall Sonenshine, a partner with boutique banking firm Sonenshine Pastor & Co.
Though the industry is in decline, Baker & Taylor has increased revenues by about 50% and operating cash flow by about 300%, partly through intrinsic growth and acquisitions. The company features annual revenue of $1.2 billion. Neither Willis Stein nor Carlyle would provide Ebitda figures for the unit.
Perhaps that's because, as Sonenshine speculates, the distribution business is low margin.
"Publishers and retailers are being squeezed and they, in turn, are squeezing distributors," Sonenshine said.
Baker & Taylor was founded in 1828; 50% of its business stems from library distribution, according to Willis Stein partner Daniel Blumenthal.
"And as libraries begin stocking DVDs and CDs, we'll be able to supply more product to them," Blumenthal said.
Carlyle turned to Goldman, Sachs & Co. and Latham & Watkins for financial and legal advice, respectively. Willis Stein negotiated financial terms of the deal in-house and used Kirkland & Ellis for counsel.
The deal is expected to close later this month.