Equity Firm Takes Private Stake in Hollander

Brent Felgner, August 10, 2009

Fresh from a debt and equity deal intended to help drive its business for years to come, Hollander Home Fashions will focus first on internal growth opportunities, increasing its market share in all of its segments, particularly in natural fills, before it pursues other businesses.

Private equity firm Huntsman Gay Global Capital, whose offices are in Palo Alto, Calif., West Palm Beach, Fla., and Salt Lake City, took majority control of Hollander in the deal, picking up three out of five board seats. But executive chairman Jeff Hollander, whose family founded the company 56 years ago, and ceo Chris Baker, who joined the company in April, will continue at the helm.

Hollander declined to specify the equity split or the value of the investment. "But I can tell you that that my family's single biggest investment is Hollander Home Fashions," he said in a telephone interview with HTT.

Privately held Hollander, which lays claim to being the largest pillow manufacturer in the world, posted sales of about $254 million last year, according to HTT estimates. It is also a leader in basic and utility bedding, holding the license for Laura Ashley, among others, in those categories.

Hollander indicated that the deal represented a balancing of debt and equity, but emphasized that HHF was not leveraged on the basis of cash flow. Instead, the loans are asset-based and "barely 50% of availability." Hollander said he's taken no position with Huntsman Gay, noting that he's already involved with his own private equity interest, Laser Partners.

"They saw our plans, and they're comfortable with doing as much as we can organically, first," he said. "At the same time, they are prepared to make significant additional investments to grow, whether organically or through acquisitions. They are allowing Chris and I to take the lead, come up with the vision and the strategy. But as we're coming up with the strategy, they're helping us think about it in longer-term views."

The early focus on organic growth appears to represent a subtle shift in HHF's evolving strategy over the last several weeks. In an interview with HTT last month, Hollander and Baker indicated that while no acquisitions of other firms were imminent, the company was actively looking into at least one firm in outdoor furniture, a prospect they believed could be easily integrated utilizing Hollander's core competencies.

Huntsman Gay Global Capital is a new private equity concern that raised an initial $1.1 billion fund for investments and buyouts of middle-market companies. It was formed by industrialist Jon Huntsman and former Bain Capital chairman Robert Gay.

"Our high-profile general partners leverage an established network of intermediaries and business owners — as well as unique international and domestic relationships including Bain Capital — for access to a multitude of opportunities across a broad range of industries, asset classes and geographies," the firm's Website states.

The Hollander investment comes on the heels of two major prior investments: Turner Bros. Holdings, a heavy-lift rigging and transportation company; and Sandbox Industries, which manages two venture-capital funds.

Huntsman Gay's investment model stresses majority or control positions in companies with EBITDA between $15 million and $75 million with a high value placed in "stable businesses with significant market share and solid growth prospects." It also emphasizes its strong operational supports to help those businesses grow. It encourages its general partners and senior executives to co-invest in its deals, giving them a personal stake in the outcome.

"These are good people," Hollander said, "and they only deal with what they think are good, honorable companies with nice people running them. These guys see such good opportunities in our industry that they co-invested as well. Bob [Gay] and Jon [Huntsman] put their own money into this and their personal profits go to charity."

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