KKR to Sell CHI Overhead Doors to Nucor, Generating Windfall for Itself and Employees

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CHI’s hourly workers will make between $20,000 and $800,000 each before taxes when deal closes

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The private-equity firm, which paid more than $600 million for the garage-door maker in July 2015, is set to make 10 times the equity it put in. It will be KKR’s highest-returning US buyout in more than 30 years.

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Meanwhile, CHI’s hourly employees, including those who build and deliver its doors, will make between $20,000 and $800,000 apiece before taxes when the deal closes. In total, employees will get $360 million, with a substantial majority going to those below the C-suite level.

What happened at CHI is the result of a broad-based stock-ownership program KKR put in place when it bought the business. Employees received stock on top of their regular wages and benefits. No one making less than $100,000 was allowed to invest any of their own money.

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It is a model that KKR has rolled out at all of its US industrial holdings and is expanding across its buyout portfolio. The effort is spearheaded by Pete Stavros, the firm’s co-head of private equity for the Americas. Mr. Stavros believes giving stock to lower-level employees financially elevates working families and creates better alignment among workers, management and shareholders.

He is trying to make that model the norm more broadly, recently launching a nonprofit dedicated to promoting employee ownership.

Based in Arthur, Ill., CHI makes garage doors for residential and commercial use. The company was founded in 1981 and had been through three private-equity owners before KKR bought it.

With a staff of 800, it is by far the largest employer in Arthur, a village of fewer than 3,000 people about three hours south of Chicago. The company also draws employees from the surrounding area and has another factory in Terre Haute, Ind.

When KKR bought the company, it told workers they were becoming owners and could make at least $15,000 each if CHI hit its goals. The payouts would be based on seniority and tenure.

At an event last Wednesday at CHI’s headquarters, Mr. Stavros stood up in front of a crowd of about 400 employees and announced the company was being sold, according to a video of the event viewed by Businesshala. Employees hired since January would each get $20,000, he said.

The room erupted in whoops, hollers and thunderous applause as those who had worked at CHI for longer realized they would be receiving significantly more.

“It is life-altering,” said Josh Ryan, an assembly-line supervisor at CHI’s Arthur factory who has worked for the company since 2016. “I can’t explain how much it’s going to change—not just people’s lives here—it’s going to change this entire community.”

Mr. Ryan’s brother, his fiancée and his soon-to-be-mother-in-law also work for CHI. Together, his family members will make $750,000 before taxes when the deal closes.

With three daughters and a baby on the way, Mr. Ryan said he doesn’t have to worry about being able to afford sending them to college.

CHI paid for financial-planning counselors from Goldman Sachs Group Inc.’s

Ayco unit and tax assistance from EY for all employees. Both are providing their services at a discounted rate.

When KKR bought CHI, the company had been under private-equity ownership for more than 15 years and the firm had to find new ways to advance the business, according to KKR officials.

It set goals to improve CHI’s safety record and reduce steel waste. The company implemented a more efficient manufacturing process, scheduling delivery for orders before they were manufactured and filling trucks so that the first delivery was the last one loaded on.

Ownership meant everyone got more of a say. Consultants KKR brought in helped supervisors get better at soliciting and receiving feedback. Truck drivers came forward with ways to make their routes more efficient, and people in the plant recommended more cost-effective ways to purchase steel.

Chief Executive Dave Bangert, who will continue to lead CHI under its new ownership, kept staff abreast of performance metrics so they knew whether they were meeting their goals.

“The broad-based ownership program changed everything,” said Chris Jones, a 16-year CHI veteran who serves as director of dealer relations.
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“Everybody knew they could benefit from their hard work.”

Financial performance at CHI improved significantly, with revenue more than doubling and the company’s key profit margin climbing to 35% from 21% in 2015. In addition to the coming payouts, employees received about $9,000 each in dividends over the years of KKR’s ownership.

Write to Miriam Gottfried at [email protected]

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Credit: www.Businesshala.com /

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