|  In
1998, THARCO Holdings, Inc., was the leading independent manufacturer
and distributor of corrugated and engineered foam packaging
solutions in the Western United States. With sales of $125
million and seven locations, the company had been owned and
operated by the Aitchison family since its founding in 1952.
The Aitchison family sold a majority equity interest to CHS
after seeking a partner to facilitate an estate planning transaction
and conducting rigourous due diligence on CHS. At that time
CHS had completed over fifty estate planning transactions,
allowing owner-operators to diversify concentrated risk positions,
remain significant shareholders and continue in senior management
roles.
Tharco presented an opportunity to work with
the Aitchison family to extend Tharco’s profitable,
niche focus in the highly competitive corrugated box industry
and to generate incremental profitability through operating
improvements. Our partnership with the Aitchison family allowed
the company to retain valuable customer relationships, deep
market knowledge and an entrepreneurial culture as CHS oversaw
the transition from a family-owned company to institutional
ownership.
Within a year of closing, CHS oversaw the
acquisition of Thacker Container Company, the company’s
largest independent, West Coast competitor. The acquisition
brought Tharco a substantial presence in Southern California,
strong customer relationships and a unique, new product line.
CHS also oversaw the implementation of improved reporting
and financial controls, compensation-based compensation structures
for key employees and the addition of sophisticated management
talent in numerous operating areas.
As a result of the general economic downturn
that began in 2000, the corrugated box market experienced
a three-year decline in box volume from 2000 through 2002.
The downturn was particularly acute in Northern California
where Tharco had a concentration of sales to technology companies.
In response, senior management, with support and oversight
from CHS and the Aitchison family, undertook several major
initiatives to improve performance and reinvigorate sales
growth. CHS recruited Bo Fears, a 25 year corrugated industry
veteran, to become Chief Executive Officer. Bo quickly identified
several areas for operational improvement, cost savings and
revenue enhancement. The aggressive strategic plan yielded
positive results, invigorating management, other employees
and the company’s lenders.
When the industry recovered, Tharco emerged
with market leading positions, low cost manufacturing, a lean
organization and a talented and aggressive sales team. Recognizing
that outstanding execution by the management had resulted
in Tharco becoming an attractive platform from which to build
a national competitor, CHS and the company retained an advisor
to market the company. After a broad auction, CHS sold Tharco
to a financial sponsor with experience in the packaging industry.
The successful exit in July 2005 generated a 23% IRR and returned
4.4x CHS’ invested capital. |
