Clayton, Dubilier & Rice Said in Talks to Buy Harrington for $800 Million

Clayton, Dubilier & Rice LLC and Goldman Sachs Group Inc.’s private-equity unit are in talks to buy medical supply distribution company Harrington Holdings Inc. for about $850 million including debt, said two people with knowledge of the discussions.

The purchase from private-equity firm The Jordan Company LP may be announced as early as today, said the people, who asked not to be identified because the talks are private. The transaction would be financed with 48 percent equity and the remainder in debt, said one of the people.

“Medical distribution companies are characterized by low growth, high return on invested capital and strong cash flows,” said Steven Halper, an analyst at St. Louis, Missouri-based Stifel, Nicolaus & Co. Inc. “They are ideal private-equity acquisitions.”

Private-equity deals have increased six-fold in the past year, to $22.7 billion in the second quarter, as firms race to spend an estimated $500 billion in unused capital commitments following a 2 1/2-year drought in buyouts. Goldman Sachs Capital Partners is working on investing a $20 billion fund raised in 2007. Clayton, Dubilier & Rice has deployed 20 percent of its current $5 billion buyout fund over the last 12 months in four transactions.

Tom Franco, a spokesman for Clayton, Dubilier & Rice, declined to comment. An outside spokesman for The Jordan Company didn’t immediately return calls seeking comment. Goldman Sachs spokeswoman Andrea Raphael declined to comment.

The Jordan Company bought Harrington, which operates Edgepark Medical Supplies, in 2007.

Clayton, Dubilier & Rice has previously invested in healthcare distribution. In 2004, it bought medical products company VWR International LLC for $1.68 billion. It exited the investment in 2007, selling it to Madison Dearborn Partners LLC in a $3.6 billion deal.

In October, the firm said it would buy a 46 percent stake in Diversey Inc. as part of a $2.6 billion recapitalization of the Sturtevant, Wisconsin-based provider of commercial cleaning, sanitation and hygiene products.

Jefferies Group Inc. is advising The Jordan Company on the sale. Jefferies and GSO Capital Partners, a unit of Blackstone, will provide some of the debt financing, said one of the people.

To contact the reporters on this story: Cristina Alesci in New York at Calesci2@bloomberg.net.

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