CHB Capital Partners

Current Newsletter

Spring 2008

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Spring 2008


For those of you used to receiving our occasional missives in the mail, welcome to the new e-version of the CHB newsletter. We are fairly sure this whole Internet thing is here to stay and have, at last, bowed to the march of technology. You can expect to continue to receive these newsletters (unless you tell us you would rather not) every six months or so to update you on what we are doing here at CHB.

New Investments - In August, we completed a $7 million equity investment in Newline Products, Inc. Headquartered in Plano, TX with manufacturing operations in Shanghai, China, Newline is a manufacturer of visual display products such as markerboards, tackboards and chalkboards and is a distributor for numerous other product lines used in the education construction market. The Company has grown rapidly since its founding in 2003 (over 100% per year compounded) and partnered with CHB to help it continue to penetrate new markets in the US and internationally. To learn more about Newline please call Blake Morris.

Last month, we acquired Zhone Technologies’ optical networking division. Renamed Sorrento Networks, the company is a global provider of metro/regional optical access solutions, offering wavelength-division multiplexing product portfolio to telecom carriers and enterprises. Sorrento’s products efficiently add and manage bandwidth across existing fiber infrastructure. The company is located in Denver, CO with operations in Oakland, CA and Stuttgart Germany. To learn more about Sorrento, please call Sean McClenaghan.

In addition, we are now working on three platform deals under letter of intent with an aggregate equity commitment of approximately $25 million. Subject to the completion of our due diligence, we expect these deals to close throughout the next few months.

Fund Raising - With the above investments, Fund III, which had a final close in early 2006, will be largely invested and we expect to be in the market for Fund IV some time this year.

Portfolio Update - HiRel Systems, a Minnesota based manufacturer of custom magnetics and power supplies, continues to ramp up its manufacturing operations in Zhuhai City, China and Santo Domingo, The Dominican Republic. In 2008, the Company is projecting that more than half of its magnetics business will be made in these new facilities. This investment in offshore capabilities has positioned the company to capture new business opportunities in its core medical, military, avionics and industrial controls markets. To learn more about HiRel, please call Sean McClenaghan.

In June, CT Systems, a Kansas based assembler and integrator of complex electromechanical assemblies and provider of precision-machined components acquired a St Louis based manufacturer of precision-machined parts for use primarily in the aerospace market, substantially broadening its customer base and capabilities. In December, the Company acquired another precision machining provider outside of Wichita, KS. Independent of these acquisitions, the Company had a record year in 2007, tripling EBITDA through organic growth alone, primarily related to the aerospace market. To learn more about CT Systems, please call Grant Clayton.

Micro Dynamics and Logic PD (product design and electronic manufacturing services) continue to grow within their target markets - aerospace, medical and industrial OEMs with lower-volume, complex, electrical products. The company expects 2007 revenue to be up 15% over last year. To learn more about Micro Dynamics and Logic PD, please call Blake Morris.

CanGen Holdings, a manufacturer of highly engineered wear parts used by plastic and rubber processors, had another record year in 2007. CanGen has deployed additional sales and marketing resources to pursue several attractive adjacent market opportunities and is also in the process of identifying and contacting international acquisition candidates to broaden its geographic reach. To learn more about CanGen, please call Steve Greene.

Personnel - In August, Will Kilpatrick joined the Atlanta office as an associate, replacing Jim Shilkett who is now at University of Chicago Graduate School of Business. Will previously spent two years with Harris Williams in Richmond, VA.

About CHB Capital Partners - Founded in 1993, CHB Capital Partners is a private equity fund with over $150 million under management that provides equity capital and strategic, financial and operating expertise required for smooth ownership transitions and growth. CHB's eight investment professionals have over 100 years of management consulting, operations and investment experience.

Investment Strategy - CHB makes equity investments of $3-$15 million in three types of transactions: leveraged recapitalizations, management-led buyouts and growth equity investments. The common element in each of our transactions is that we invest alongside strong management teams that have, or are willing to make, a significant equity commitment to the business. Consequently, CHB does not participate in transactions where an owner is contemplating the complete sale of the business and management is not in a position to invest with CHB in the recapitalization of the company.

Industry Focus:
Generalists – niche manufacturing, distribution and service businesses

Target Investment Characteristics:
Minimum revenues of $10 million
EBITDA between $2 million and $10 million
Scalable business operating model
Proven management team
Headquartered in United States

We encourage you to call us with interesting investment opportunities. Should you call, we guarantee you a thoughtful and timely response.

511 Sixteenth Street, Suite 600, Denver, CO 80202
P: (303) 571-0100   F: (303) 571-0114

75 Fifth Street NW, Suite 1025, Atlanta, GA 30308
P: (404) 806-7520   F: (404) 806-7530