Griffon Corp., the New York-based maker of radar systems and garage doors, agreed to buy Ames True Temper Inc. for about $542 million, including debt, to expand into garden tools in its biggest acquisition to date.
The transaction will be funded with $75 million in cash and $500 million in debt financing, Chief Executive Officer Ron Kramer said in an interview. The deal probably will add to cash flow and earnings per share in fiscal 2011, according to the company.
The acquisition boosts Griffon’s annual revenue by about a third through sales of wheelbarrows, shovels and other tools for maintaining gardens and lawns. Griffon, which has posted four straight quarters of profit, plans to use its ties to retailers like Home Depot Inc. to help spur sales, he said.
“We’re starting to use our financial power to go and buy quality businesses,” said Kramer, 51.
Goldman Sachs Group Inc. served as an adviser to Griffon. The New York-based investment firm owned 10 million shares, or almost 17 percent of Griffon, as of March 31, according to data compiled by Bloomberg. Griffon’s market value amounted to almost $700 million as of July 16.
Griffon outbid private-equity firms in an auction managed by Credit Suisse Group AG and UBS AG, said Kramer, declining to identify the rival bidders. Castle Harlan Inc., a New York buyout firm, and the toolmaker’s management have owned Ames True Temper for about six years.
Kramer said he’s reviewed “dozens” of possible transactions during the past year. He pursued Ames True Temper because the tools the company sells to Home Depot complement its garage doors, which are also available at the U.S. home- improvement retailer.
Home Depot accounted for 30 percent of Ames True Temper’s sales last year, followed by Lowe’s Cos. at 20 percent, according to regulatory filings. Ames True Temper also sells to Wal-Mart Stores Inc., the world’s biggest retailer.
The purchase of Camp Hill, Pennsylvania-based Ames True Temper probably will close by Sept. 30, according to Griffon. Duane Greenly will remain CEO of Ames True Temper, and no cuts to the toolmaker’s 1,600-person workforce are planned, Kramer said.
Buying Ames True Temper will leave Griffon with more than $100 million in free cash, which is “plenty of firepower within the company to go and do another deal at least this size,” Kramer said.
Castle Harlan acquired Ames True Temper in 2004 along with management, which owns about 13 percent, according to the toolmaker’s annual securities filing.