* Complicated carve-outs a specialty
* Investment has quadrupled in value
* Some workers protest outsourcing
By Steve Bills
NEW YORK, July 26 (Reuters-BUYOUTS) - Sensata Technologies
Holding NV recently became a flashpoint in Mitt Romney's
presidential campaign, after workers at an Illinois factory
appealed to the former Bain Capital executive to prevent the
closing of their plant and the transfer of work to China.
From Bain Capital's point of view, however, the maker of
automotive sensors has been a huge success, quadrupling the
firm's investment since it acquired the business from Texas
Instruments in 2006. Seth Meisel, a managing director at the
Boston-based buyout shop, discussed the company at an industry
conference last month, using it as a central example of the way
Bain Capital can profit from its investments despite troubles in
the macro economy, through what Meisel described as
Indeed, the Sensata deal is right in Bain Capital's
wheelhouse - a complicated carve-out. Bain Capital invested $770
million of equity in April 2006 for the Dutch division of Texas
Instruments, the maker of sensors and controls that go into
vehicles, appliances and other products.
At the time of the deal, the economy had already peaked and
sectors such as housing and auto sales were headed for serious
slumps, Meisel said in remarks prepared for his presentation.
"But our diligence revealed underlying second order drivers -
safety, fuel efficiency, convenience and emissions - that would
lead to growth even if the macro slowed."
For instance, demand was growing among automakers for
electronic stability controls - computerized systems that
prevent cars from skidding, Meisel said. Too, Bain Capital
anticipated future growth in emerging markets such as China.
Although vehicle sales would fall by a third during the Great
Recession and housing starts would tumble by nearly three
quarters, Bain Capital and the Sensata management team managed
to keep revenue and EBITDA stable during the slump and to build
the company both organically and through acquisitions as the
economy began to recover in 2009.
As a result, at a compound average growth rate from 2006
through 2011, "revenue grew nearly 10 percent, EBITDA more than
10 percent and we have approximately quadrupled our investors'
investment thus far," Meisel said.
Bain Capital took Sensata public through an IPO in March
2010. The firm's $770 million investment is now valued at $3.2
billion, including more than $1 billion in realized value. Bain
Capital still owned 51 percent of the company at the end of
2011, a regulatory filing showed.
Employees at a Sensata plant in plant in Freeport, Illinois,
appealed to Romney earlier this month to stop their jobs being
shipped overseas, as sister news service Reuters reported.
Romney is struggling to divert attacks by President Barack Obama
and his campaign that portray him as a job killer who does not
understand ordinary Americans.
Sensata bought the Freeport plant as part of an acquisition
of Honeywell International's auto-sensor business in late 2010.
The 170 jobs there were at risk from the start of the purchase,
But the campaign seems not to have gotten much traction;
Sensata has not addressed the outsourcing question, nor did it
come up during Sensata's earnings call on Wednesday, when the
company reported results that beat expectations - earnings of
$0.54 per share, versus the expected $0.53.
Such divergences between the general economy and specific
companies are more common that you might think, Meisel said in
his presentation. Bain Capital is looking at markets as diverse
as housing, chemicals, energy and mining to find new
"We retain our conviction that great deals can be done in
most any environment and we are business as usual seeking out
opportunities," Meisel said. "What I'm doing every day
looking for themes and investment opportunities against those
themes so even if the macro rains I hope to be smiling; and I
hope we'll all be smiling."