KKR to sell CHI overhead doors to Nucor, generating a windfall for itself and its employees

Private equity giant KKR KKR 7.11%

& Co. aims to generate significant returns for its investors when it sells a business. Its latest deal will also offer a serious payout to another type of investor: the company’s workers.

KKR announced on Monday that it would sell CHI Overhead Doors to steel producer Nucor Corp.

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for $3 billion, debt included.

The private equity firm, which paid more than $600 million for the garage door maker in July 2015, is expected to earn 10 times the capital invested. This will be KKR’s most profitable U.S. takeover in over 30 years.

Meanwhile, CHI’s hourly employees, including those who build and deliver its doors, will earn between $20,000 and $800,000 each before taxes at the close of the deal. In total, employees will receive $360 million, with a substantial majority going to those below the C-suite level.

What happened at CHI is the result of an extensive stock ownership program that KKR put in place when it purchased the company. Employees received shares in addition to their regular salaries and benefits. No one earning less than $100,000 was allowed to invest their own money.

It’s a model that KKR has rolled out across all of its US industrial operations and extends across its entire buyout portfolio. The effort is led by Pete Stavros, the company’s co-head of private equity for the Americas. Stavros believes giving stock to lower-level employees financially elevates working families and creates better alignment between workers, management and shareholders.

He is trying to make this model the norm more broadly, recently launching a nonprofit organization dedicated to promoting employee ownership.

Based in Arthur, Illinois, CHI manufactures garage doors for residential and commercial use. The company was founded in 1981 and had gone through three private equity owners before KKR bought it.

With a workforce of 800, it is by far the largest employer in Arthur, a village of fewer than 3,000 people about three hours south of Chicago. The company also attracts employees from the surrounding area and has another plant in Terre Haute, Ind.

“I can’t explain how much it’s going to change – not just people’s lives here – it’s going to change this whole community.”

– Josh Ryan, assembly line supervisor for CHI in Arthur, Illinois.

When KKR bought the company, he told the workers they were becoming owners and could earn at least $15,000 each if CHI met their goals. Payments would be based on seniority and seniority.

At an event last Wednesday at CHI headquarters, Stavros stood up to a crowd of about 400 employees and announced the company was sold, according to video of the event seen by The Wall Street Journal. . Employees hired since January would each receive $20,000, he said.

The hall erupted in shouts, shouts and thunderous applause as those who had worked at CHI longer realized they would receive much more.

“It’s life changing,” said Josh Ryan, CHI’s Arthur factory assembly line supervisor who has worked for the company since 2016. people’s lives here – it’s going to change this whole community.

Mr. Ryan’s brother, fiancée and future mother-in-law also work for CHI. Together, his family members will earn $750,000 before taxes when the deal closes.

With three daughters and a baby on the way, Mr Ryan said he need not worry about being able to afford to send them to university.

CHI paid Goldman Sachs Group financial planning advisors Inc.

Ayco unit and EY tax relief for all employees. Both offer their services at a discounted rate.

When KKR bought CHI, the company had been privately owned for more than 15 years and the company needed to find new ways to move the business forward, KKR officials said.

He has set goals to improve CHI’s safety record and reduce steel waste. The company implemented a more efficient manufacturing process, scheduling orders to be delivered before they were made and filling trucks so that the first delivery was the last loaded.

Ownership meant everyone had more of a say. The consultants KKR brought in helped supervisors better solicit and receive feedback. Truckers suggested ways to make their routes more efficient, and plant employees recommended more cost-effective ways to buy steel.

Chief Executive Dave Bangert, who will continue to lead CHI under new ownership, kept staff updated on performance metrics so they knew if they were meeting their targets.

“The large-scale ownership program changed everything,” said Chris Jones, a 16-year CHI veteran who serves as Director of Dealer Relations. “Everyone knew they could benefit from their hard work.”

CHI’s financial performance improved significantly, with revenue more than doubling and the company’s key profit margin increasing from 21% to 35% in 2015. In addition to future payouts, employees received approximately $9,000 each in dividends over the years of KKR ownership.

Write to Miriam Gottfried at [email protected]

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