American Capital Offloads Lifoam

Last week, American Capital Ltd. (ACAS - Analyst Report) announced the divesture of its portfolio company, Lifoam Holdings Inc. Jarden Corporation (JAH - Snapshot Report) acquired the unit in December 2012 for $60 million.

Headquartered in US, Lifoam leads the market in providing expandable polystyrene (EPS) and polyurethane (PUR) products. Lifoam's products include foam picnic coolers, reusable ice and freeze packs and sophisticated protective and thermal packaging products. The company provides products for consumer, healthcare and commercial applications.

Of the proceeds, American Capital received $60 million in debt and equity proceeds and earned $14 million, subject to post-closing adjustments. The company has earned 11% compounded annual rate of return on its debt and equity securities over the life of its investment, including interest, dividends, capital gains and fees.

Despite the economic downturn, Lifoam recorded strong and steady growth in earnings. With the support of American Capital, Lifoam is well positioned for continued growth in the future, attributed to its strengthening foothold in the attractive healthcare cold chain packaging market.

American Capital anticipates the deal to be accretive based on its returns from the sale and expects to continue seeking new One-Stop Buyout opportunities or supporting private equity buyout.

Headquartered in New York, Jarden is a manufacturer and seller of consumer products globally and the buyout has broadened its customer base. Further, Jarden's experience and ongoing growth in the international market will facilitate Lifoam to further expand in the industry and maintain market share.

Also, in 2012, American Capital divested its portfolio company - Aptara Inc. - to iEnergizer Limited for $144 million. Of the proceeds, American Capital and its associates received $134 million, subject to post-closing adjustments, out of which about $108 million was solely received by American Capital.

American Capital is a publicly traded private equity firm and global asset manager. The company directly and through its asset management business, initiates, underwrites and manages investments in middle-market private equity, leveraged finance, real estate and structured products. Since American Capital's 1997 IPO, through the third quarter of 2012, the company has earned 27% compounded annual return on the exit of its equity investments, including dividends, fees and net gains.

The company has the ability to provide flexible financing solutions ranging from a variety of senior debt and uni-tranche to mezzanine and equity co-investments. Further, American Capital provides multi-currency funding with a global underwriting platform and facilitates the growth of portfolio companies. Such benefits induce private equity clients to consider it as an investment partner, which in turn helps the company broaden itself.

American Capital is expected to announce its fourth-quarter results on Feb 5. The Zacks Consensus Estimate for the quarter is 25 cents per share on revenue expectation of $148 million.

The earnings ESP (Read: Zacks Earnings ESP: A Better Method) for the company is a negative 4.00% for the fourth quarter. This, along with its Zacks Rank #2 (Buy), reduces the chance for a positive earnings surprise.

Other Zacks Rank #2 (Buy) companies in the same industry include Hercules Technology Growth Capital, Inc. (HTGC - Analyst Report) and Apollo Investment Corporation (AINV - Snapshot Report).