Terms of the deal call for Apax to pay $16 per share for Quality, a premium of 63% to the target's May 6 close. The agreement includes a 40-day go-shop period where Quality may solicit alternative proposals.
Tampa-based Quality operates the largest chemical bulk logistics network in North America, and is also a provider of intermodal tank container and depot services through its Boasso American firm. The company also provides transport services to the oil and gas industries.
Company Chairman and CEO Gary Enzor said in a statement, the buyout "maximizes value for our shareholders" while giving Quality the financial wherewithal to pursue growth, including M&A.
"Apax supports our strategy and is committed to helping us continue our pursuit of strategic growth in our chemical and intermodal businesses while managing the current market conditions in the energy industry," Enzor said. "They will bring financial resources and expertise that will assist us as we expand Quality Distribution through internal investment and initiatives as well as disciplined acquisitions."
The deal comes as logistics M&A is heating up, fueled by growing margin pressure and a desire by larger operators to roll up smaller rivals and build out their portfolios. In recent weeks, Echo Global Logistics (ECHO) announced a planned $420 million purchase of Command Transportation and XPO Logistics (XPO) said it would buy both Norbert Dentressangle SA for €3.24 billion ($3.53 billion) and Bridge Terminal Transport Services for $100 million.
This would mark Quality's second stay in a private equity portfolio. Apollo Global Management invested $78.9 million in a 1998 leveraged buyout of the company, then known as MTL, taking it public in 2003. Quality also said Thursday that it earned net income of $2.5 million on total revenue of $230.4 million in the first quarter, down from net income of $3.1 million on sales of $234.5 million in the same quarter a year prior.
Apax partner Ashish Karandikar called Quality a market leader in the chemicals transport business, saying the company "is well positioned to take advantage of both organic growth opportunities and strategic acquisitions while benefiting from the financial and operational flexibility of operating as a private company."
Apax said it has secured committed financing for the transaction provided by Deutsche Bank AG New York Branch, Bank of America NA, Jefferies Finance LLC, MIHI LLC and SunTrust Bank.
An RBC Capital Markets team of Matt Thomson and Vito Sperduto served as financial adviser to Quality Distribution, with Steve Epstein and Abigail Bomba of Fried, Frank, Harris, Shriver & Jacobson providing legal advice. A Skadden Arps, Slate, Meagher & Flom LLP team of Ann Beth Stebbins, Don Frost Jr., Erica Schohn, Victor Hollender and David Schwartz joined with Jay Ptashak and Judson Oswald of Kirkland & Ellis LLP to advise Apax.