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Thomas H. Lee triumphs in Party City recap

by Vyvyan Tenorio | Published June 5, 2012 at 11:47 AM

Boston private equity firm Thomas H. Lee Partners LP has prevailed in the heated auction for Party City Holdings Inc., on Tuesday, June 5, recapitalizing the party goods supplier at $2.69 billion.

Majority owners -- Advent International Corp., Berkshire Partners LLC, Weston Presidio and company management -- will retain significant minority stakes following the closing.

The transaction value equates to roughly 10 times the company's 2011 Ebitda.

TH Lee beat out other leveraged buyout majors, including a Leonard Green & Partners LP-TPG Capital partnership and BC Partners Ltd., which were among the finalists.

As The Deal Pipeline reported, Goldman, Sachs & Co. and Deutsche Bank Securities Inc. served as intermediaries for the company, which had also filed for an initial public offering more than a year ago, in April 2011.

Elmsford, N.Y.-based Party City, known for its pop-up Halloween City superstores, is a wholesaler and retailer of party goods, metallic balloons, accessories, novelties, gifts and stationery. Founded in 1947, Party City boasts the largest distribution network in North America with more than 1,200 locations. The company also sells directly to customers through its e-commerce website, PartyCity.com.

"Party City leads the $10 billion retail party goods industry in terms of product selection and retail network," said TH Lee managing director Todd Abbrecht in a statement. "We look forward to working closely with the team at Party City to maximize its scale and vertically integrated business model to continue to grow its business."

Advent acquired its 37.04% stake in August 2008, investing more than $250 million of equity in a prior recap that allowed Berkshire Partners and Weston Presidio to keep 36.08% and 17.42%, respectively.

Under their ownership, revenue increased from about $1.25 billion in 2007 to $1.87 billion in 2011, marking a drop in sales only in 2009 before rebounding strongly in 2010. Adjusted Ebitda rose from $152 million to $268 million during the same period.

In December 2010, the company refinanced its term loan and paid a one-time $311.2 million sponsor dividend, the only such cash payout in the last five years. According to the S-1 documents, the sponsors collected $1.3 million in annual management fees.

"The management team and I look forward to welcoming THL as an investor and working with the expanded shareholder group to position us for future growth across each of our channels," said Party City CEO Gerald C. Rittenberg in a statement. "We are appreciative of the terrific partnership and guidance of our existing investors in the development and execution of our strategic plan."

Advent managing director Steven J. Collins and David Mussafer, Berkshire's Richard K. Lubin and Robert J. Small, and Weston Presidio's Michael F. Cronin and Kevin M. Hayes led their firms on the investment and sit on the board.

Bank of America Merrill Lynch and Moelis & Co. acted as financial advisers to Thomas H. Lee, which also tapped Weil, Gotshal & Manges LLP for legal counsel. Besides Goldman Sachs and Deutsche Bank on the sell side, Ropes & Gray LLC advised Advent, Berkshire Partners and Weston Presidio. Ropes & Gray's team comprised Jane D. Goldstein, Christopher M. Leich, Sunil Savkar and Jonathan M. Zorn.

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Thomas H. Lee triumphs in Party City recap

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