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Riverside Engineers Strong Gains for Investors with Exit of Railroad Company June 01, 2009

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Sale of Rail Equipment and Services Platform Delivers 5.1x Gross Cash-on-Cash Return

Deal Type: 
Sale of Nordco, Inc. to OMERS Private Equity, a subsidiary of OMERS Administration Corporation

Key Stats:
5.1x Gross Cash-on-Cash Return; 31% Gross IRR
  
Fund Families:
Nordco is a cross fund investment between the 2000 Riverside Capital Appreciation Fund (“RCAF 2000”) and the 2003 Riverside Capital Appreciation Fund (“RCAF ’03”).

Nordco, Inc.

 
Based in Oak Creek, Wisconsin

  • Designs, manufactures and markets equipment used in the construction, maintenance, and repair of railroad tracks. Specializes in Maintenance-of-Way (MOW) equipment, service parts and rebuilds.
  • Serves the North American freight, transit and passenger railroad markets, including all seven Class I North American railroads (Burlington Northern Santa Fe, Union Pacific, CSX, Norfolk Southern, Canadian Pacific, Canadian National, and Kansas City Southern).
  • Owns manufacturing facilities in Oak Creek, Arcola, Illinois, Grandview, Missouri, and Oshawa, Ontario. Leading supplier of spikers, spike pullers, tie exchangers, anchor applicators, rail lifters and snow removers/ballast regulators.
  • Under Riverside ownership, has expanded product offerings to include rebuilt MOW machinery, in-house and on-site machinery inspection, railcar movers, and ultrasonic rail testing services.

Ownership Highlights:
After purchasing Nordco in 2003 in a management-backed buyout, Riverside assisted in the development of a strategic plan to leverage the company’s strengths in the MOW equipment and service parts market while diversifying its product and service offerings. Within the first six months of the platform acquisition, Riverside worked with management to move the company into a larger and more modern facility. Riverside backed the launching of a “rebuild and repair” segment that achieved 36% CAGR during Riverside’s period of ownership. Riverside also guided the company through steady organic growth during the first three years of ownership and pursued a highly disciplined add-on strategy that resulted in four acquisitions during the firm’s hold period: JER Overhaul (September 2006), Dapco Industries (March 2007), Dapco Technologies (March 2007), and Shuttlewagon (April 2008). Those acquisitions allowed Nordco to diversify further into other aspects of the rail equipment and services, including MOW equipment repair and rebuild services, ultrasonic rail inspection and railcar mover manufacturing.
 
Quotes:
Tim Gosline, Riverside Partner
“Partnering with the excellent Nordco Management team has truly been a pleasure. The returns generated by this sale, despite the tough environment, are a testament to the quality of Nordco’s business model and its management. This transaction is a great example of Riverside’s ability to guide and grow companies to their full potential, even during challenging times.”

Bruce Boczkiewicz, Nordco President and CEO
“Riverside has been a fantastic partner over the past six years. With Riverside’s help, we have successfully diversified into additional strategic segments of the rail services industry, seamlessly integrated four valuable acquisitions into the Nordco family, and grown our core market position. While we will remember our relationship with Riverside fondly, we look forward to our new partnership with OMERS.”

Riverside Team:
Tim Gosline, Partner; Chip Walker, Principal; and Ryan Richards, Associate.

Partners:
Harris Williams acted as the exclusive adviser to Nordco and Riverside on the transaction. Jones Day provided general counsel to Riverside on the sale.

The Riverside Company (www.riversidecompany.com or www.riversideeurope.com)
The Riverside Company is the largest global private equity firm focused on the smaller end of the middle market (“SEMM”) and is one of the industry’s most experienced leveraged buyout investors. Riverside invests in premier SEMM companies valued up to $150 million and partners with strong management teams to build companies through acquisitions and value-added growth. Since its founding in 1988, the firm has invested in 214 transactions with $4.7 billion in enterprise value, and has a current portfolio in North America, Europe and Asia consisting of 68 companies. Riverside offers certainty to close and can complete acquisitions in as little as 45 days, thanks to its more than $3.0 billion of capital under management, over 180 professionals in 18 offices (Atlanta, Brussels, Budapest, Chicago, Cleveland, Dallas, Eindhoven, Hong Kong, Los Angeles, Madrid, Munich, New York, Prague, San Francisco, Seoul, Stockholm, Tokyo and Warsaw), and long-standing relationships with partner lenders. As of March 31, 2009, Riverside’s portfolio had combined annual sales of $3.4 billion, EBITDA of $530 million and more than 14,000 employees. According to Thomson Venture Economics, as of December 31, 2008, six of the firm’s eight mature vintages are top quartile performers on a net IRR basis, and seven are top quartile on a net cash-on-cash basis. Riverside’s investors include the world’s leading pension funds, endowments, funds-of-funds, insurance companies and banks.

Nordco, Inc.
Nordco is the leading designer, manufacturer, and rebuilder of railroad Maintenance-of-Way equipment in North America. The company provides complete, targeted solutions that make it possible for the railroad industry to build, improve, maintain, and inspect its track infrastructure. It serves the North American Class I railroads, regional and short-line railroads, public transit systems, contractors, equipment leasing companies, rail mills, and others. Please visit www.nordco.com for more information.

OMERS
OMERS Private Equity (www.omerspe.com) is one of Canada’s largest and most accomplished private equity investors. OMERS Private Equity manages the private equity activities of OMERS and today has in excess of $4 billion of investments under management. The group’s investment strategy includes the active ownership of businesses in North America and Europe.

Media Contact

Stephanie Fraser
Marketing Consultant
The Riverside Company
Cleveland: +1 216 344 1267
London: +44 20 3077 1923