TriMas Spinoff Plans On Broadening Horizon Via M&A

TriMas (TRS) spun off its former Cequent businesses into the new Horizon Global (HZN) earlier this month during the ‘Summer of Spin’. Although the new company has a strong position in the towing, trailer and cargo management businesses, management’s sights are set much higher. Crain’s Detroit recently ran a great profile on the company highlighting management’s hunger for expansion via M&A. The company doesn’t plan on waiting long…in fact, new CEO Mark Zeffiro thinks the first acquisition could take place within the ‘next quarter or so’. Kind of like Paypal. The company’s aggressive M&A approach should come as no surprise though given Co-Chairman’s Sam Valenti III’s track record. Mr. Valenti helped build Masco (MAS) into a juggernaut via M&A and he believes Horizon will ‘be a private-equity firm that trades as a public company’. Not exactly how its described on its website.

So what are they looking to buy? According to the article, ‘the company is looking for small manufacturers in various industries both here and abroad — but has an expansion focus on China and South America. And…it is considering joint ventures with other companies.’ Don’t expect them to go crazy and start overpaying though. Mr. Valenti said the company ‘will avoid deals brought by investment banks that require a bid process, and that its deal flow will largely come from industry friends and sources. His targets are generally small companies that are below the radar screens of private equity companies, and will generally involve healthy companies where current owners and management would rather sell at less than top of the market provided they can remain with the company.’ Nice talking points for investors – I don’t think any executive likes to say we plan on paying through the nose for crummy businesses – but it’s easier said than done. At least one person is positive on the idea as Amherst Partner’s Scott Eisenberg believes the company ‘should be able to bring about operational efficiencies by rolling up small companies.’

Horizon’s shares are trading slightly below where they opened trading and potential investors should be aware of the company’s growth plans as it brings a number of risks. In fact, in order to fund its expected buying spree, the company anticipates a secondary equity offering as early as the third quarter! They have a solid track record, but serious thought should be given about management’s ability to properly value and acquire other businesses.

Disclosure: Author holds no position in any stock mentioned.