DETROIT - Carlyle Management Group has the inside track to take over automotive molder Key Plastics LLC with a bid worth an estimated $188 million.
Lawyers for Key and its creditors picked the investment group as the preferred bidder in an auction of Key's assets, which is scheduled for early January.
Carlyle beat out JJM LLC, a New York investment company operated by Joyce Johnson-Miller.
As the selected bidder for Key, Carlyle becomes the company to beat in the auction. Any other player must best Carlyle's offer by $1.25 million, plus pay Carlyle $1.25 million as compensation.
Key CEO David Benoit said he would not be surprised if JJM makes another run at the company's assets, saying there is 'every expectation' Johnson-Miller will return. Johnson-Miller did not respond to requests for comment.
If the offer holds up, Carlyle will walk away with a company that listed $331 million in assets when it filed for Chapter 11 bankruptcy protection from creditors in March.
Creditors could recoup
Carlyle CEO B. Edward Ewing will become Key's new CEO if the bid holds up through the auction process.
Key listed $353 million in debts in March. Carlyle's bid includes $97 million in cash plus repayment of some loans. Creditors would have an opportunity to recoup additional funds, however, with access to 10 percent equity in the new Key and the potential to buy up to 2.5 percent of the acquiring company.
It is too soon to tell what unsecured creditors could get, said Key lawyer Sandra Mayerson.
The slowdown in auto production hurt the offers, Benoit said, although having both Carlyle and JJM involved added some competition to the procedure.
'Market conditions are absolutely a factor when it comes to value,' Benoit said. 'Timing is an issue - always. Certainly the conditions in March are not the conditions that are out there now.'
Sales goal set
Key has lost some contracts for future production, but no customers have pulled existing work from the plants, Benoit said. Even with the decrease and auto production slowdown, he still expects Key to post close to $500 million in annual sales.
Key Plastics molds interior, exterior and under-the-hood components for carmakers in North America and Europe, posting an estimated $500 million in sales last year.
The company spent millions of dollars on acquisitions throughout the 1990s, expanding from nine facilities in the United States and Mexico in 1995 to 34 plants in nine countries this year.
Carlyle Management Group is part of Carlyle Group, which manages $11.5 million of capital, with investments in 182 companies ranging from defense contractors to newspaper publishing.
Its leadership includes high-profile movers and shakers, including James Baker, who was secretary of state under President George Bush and most recently was point man for President-elect George W. Bush in the vote recount battle in Florida.