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AIP picks up ailing Potomac Supply Corp’s operating assets

29 Jan 2013

Potomac Supply palletsMid-market private equity firm American Industrial Partners (AIP) has bought the operating assets of struggling wood processor and product manufacturer Potomac Supply Corporation.

The 65-year-old business, which provides items including treated lumber and wood pellets, decking, fencing and pallets, filed for bankruptcy protection 12 months ago, citing liquidity problems due to “abnormally weak lumber markets”.

Although financial details of the deal were not disclosed, AIP typically makes equity investments of up to $150m in companies with EBITDA of up to $70m, according to its website.

AIP said the newly renamed Potomac Supply was capitalised entirely with equity and has no debt.

AIP’s Rick Hoffman said, “Although the company’s operations have been challenged in recent years its facilities are modern and competitive.

“Potomac is an ideal platform for our thesis in softwoods and wood treating and we look forward to working with management to drive growth and margin improvement.”

The deal is AIP’s fifth platform investment since the start of 2012, and its sixth in the building products industry within the last 18 months.

Two months ago it also bought the US operating facilities of aerospace manufacturer Hampson Industries following the company’s collapse into administration.

Hampson, which makes components for aircraft builders including Boeing and Airbus, over-egged its growth strategy and ended up with a $55m debt pile that it has since struggled to pay back.

AIP bought the assets, which it renamed AIP Aerospace, through its $717.5m fifth fund which closed in December last year.

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