Leonard Green in Deal for Mapmaker
Los Angeles buyout firm Leonard Green & Partners said Tuesday that it had reached a deal in principle to obtain control of Rand McNally & Co., the world’s largest commercial mapmaker, as it seeks to broaden its lineup of consumer-oriented companies.
If completed, the deal would finish a process Green began a year ago when it started buying Rand McNally debt.
Peter Nolan, a managing partner at Leonard Green, called the 147-year-old mapmaker, which is also publisher of Thomas Bros. guides, an ideal match for his firm.
“We’ve basically steered clear of ‘new economy’ investments,” Nolan said. “We like consumer-oriented, market-leading businesses, and Rand McNally fits the criteria.”
Under a preliminary agreement with Rand McNally’s current majority owner, AEA Investors Inc., the map company’s debt would be converted into private equity holdings, leaving Green with a majority ownership stake, Nolan noted.
Rand McNally debt holders would have to approve the conversion plan as part of the company’s continuing recapitalization, Nolan said.
Green owns 60% of Rand McNally’s senior bank debt, which cost the buyout firm $75 million.
A spokeswoman for Skokie, Ill.-based Rand McNally declined to comment on the proposal, saying banks and other debt holders were still reviewing it.
AEA Investors -- a New York firm founded in 1969 by the Rockefeller, Mellon and Harriman families -- bought the privately held company in 1997 for a reported $500 million.
A call to AEA Investors seeking comment was not returned.
Rand McNally’s Thomas Bros. division, acquired in 1999, publishes the navigational books popular among commuters, real estate agents, pizza deliverers and other users in California and elsewhere.
Nolan identified it as the fastest-growing component of Rand McNally’s business, accounting for one-fourth of the company’s annual sales.
The original Thomas Bros. Maps was founded in 1915 in Oakland by surveyor George Coupland Thomas and his brothers, Louis and Gilbert, whose bound, grid-style maps became a fixture in California cars as the state grew rapidly during the last century.
Leonard Green, founded in 1989, specializes in “middle market” companies, typically valued at $200 million to $1 billion.
Its portfolio of investments from its first three funds includes retailer Petco Animal Supplies Inc.; VCA Antech Inc., which runs the Veterinary Centers of America; Leslie’s Poolmart, the largest retailer of pool supplies; and Big 5 Sporting Goods Corp.
Founder Leonard Green, a pioneer in friendly takeovers, died in October at age 68.
Acquiring Rand McNally would expand Green’s media holdings. These now consist of Liberty Group Publishing Inc., the publisher of several community newspapers in the Chicago area, and L.A.-based AsianMedia Group, whose Asian- language broadcasting properties include KSCI-TV Channel 18.
If the debt-conversion plan is approved, Rand McNally would be reorganized under a “prepackaged” Chapter 11 filing with a federal Bankruptcy Court in Illinois, Nolan said, adding that all of the company’s vendors would be paid in full. In such a filing, the debt holders agree to a reorganization plan in advance.
Nolan said the buyout firm likes the moves Rand McNally’s chief executive, Michael Hehir, has made since taking over in June 2001.
After investing heavily several years ago in its online venture -- which has badly lagged behind AOL Time Warner Inc.’s Mapquest.com in popularity -- Rand McNally has focused more recently on its core map-printing business, Nolan said. For instance, it has rolled out Thomas Bros. guides in cities outside California, including Phoenix, Pittsburgh, Detroit and Washington.
Meanwhile, Leonard Green & Partners also said Tuesday that it had completed raising money for its biggest buyout fund to date, the $1.85-billion Green Equity Investors IV.
The 65 investors in the new fund include the California Public Employees’ Retirement System and other major pension funds, banks, insurance companies, university endowments and private foundations, Nolan said.
The fund doubles the capital managed by Leonard Green, the largest private equity firm in Southern California, to $3.7 billion.
Jonathan Sokoloff, also a managing partner at Green, said the firm had succeed in raising money despite a brutal market climate because of its consistent investing style and relatively stable performance in recent years.
“We have not strayed,” Sokoloff said. “We didn’t get seduced by the Internet, telecom and technology. Given our consumer and retail focus, we had ample opportunities to pursue e-tailing -- but thankfully, we didn’t.”
