Arsenal Considers Selling Logistics Business

Posted by Eric Haun
Friday, May 02, 2014

Private equity firm Arsenal Capital Partners is considering a sale of its business that helps U.S. oil and chemical companies reclaim import taxes, a partner at the firm said.

Timothy Zappala told Reuters that other options for the company, Charter Brokerage, included buying businesses in the same sector that would make a good fit with Charter.

He declined to put a price tag on Charter but a source familiar with the matter said it could be valued at up to $500 million.

Charter, which has annual net revenue of about $65 million to $70 million, is the largest U.S. petroleum and chemical drawback services provider.

A drawback is the refund of import duties and taxes on a product when a form of that same product is exported. Charter Brokerage connects importers and exporters in the petroleum and petrochemical industries to arrange such refunds.

New York-based Arsenal, which manages over $1.6 billion in investments, has hired Morgan Stanley to look at strategic options for Charter, Zappala said in an interview.

"We're a private equity firm, so we're always open to selling companies at the right value, but I think that's just one of the options we are considering for Charter considering their strong market growth dynamics," he said.

The possible sale comes at a time when consolidation is expected to pick up among U.S. logistics services providers - an industry that depends largely on acquisitions for growth - after a slow start in the first quarter.

PricewaterhouseCoopers said in a recent report that valuations for acquisition targets in the logistics industry in developed economies were recovering "regardless of whether strategic or financial investors were involved." (http://r.reuters.com/xyg98v)

Neovia Logistics LLC, backed by Caterpillar Inc, is exploring a sale that could value the company at more than $1 billion, people familiar with the matter told Reuters last week.

Private equity firm Oak Hill Capital Partners hired JPMorgan Chase & Co to explore a sale of logistics provider Jacobson Companies Inc, hoping to fetch as much as $700 million, Reuters reported in February.

Zappala, a former Dow Chemical Co executive who sits on Charter's board, said Arsenal would also consider buying other companies to complement Charter's services.

"The company is growing very rapidly, due to the increased trade flows around petroleum and chemical products. We would probably lean towards maintaining it longer, based on that," he said.

"If we decided to sell, the most likely buyer would be a logistics strategic who wanted access to the long-standing Charter relationships with the major petroleum and chemicals companies."

Founded in 1994, Charter manages customs clearance documentation for importers and exporters in the United States and Canada, which allows them to draw back import duties and taxes.

Arsenal invests in middle-market specialty industrial and healthcare companies.

It acquired Charter from Summit Park Partners in 2008 for an undisclosed sum, and recapitalized the company in 2012.

(By Sagarika Jaisinghani; Additonal reporting by Greg Roumeliotis and Mike Stone in New York; Editing by Saumyadeb Chakrabarty)

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