Verizon's buyer selling shipping company Horizon
By Kelly Yamanouchi
Advertiser Staff Writer
The Carlyle Group, which announced its plans to buy Verizon Hawaii on Friday, said yesterday it is selling its other major Hawai'i holding, Horizon Lines LLC.
Horizon is the second-largest ocean shipping company operating in Hawai'i, behind Matson Navigation Co. The business of transporting goods by ship to Hawai'i and other geographically isolated populations has proven to be a lucrative one for Carlyle.
New York private equity firm Castle Harlan is buying Horizon for $650 million, more than twice the $300 million Carlyle paid when it bought the company in February 2003 from CSX Corp.
According to Carlyle and Horizon, what helped to rapidly increase the value of the company was the establishment of Horizon as a stand-alone business, improvements of Puerto Rico shipping operations and investments of more than $30 million to $40 million in cranes and other assets in Hawai'i and other markets.
Carlyle spokesman Chris Ullman also said the company's turnover of Horizon after only about 14 months of ownership "is very atypical for us."
Its $1.65 billion acquisition of phone company Verizon Hawai'i, in contrast, is "clearly a long-term investment because it's a healthy company to begin with," Ullman said. "We are in the Verizon investment for the long term."
He said there is no relation between the Verizon acquisition and the Horizon sale and that two separate teams worked on the deals. Washington, D.C.-based Carlyle is one of the largest private equity investors, with $18 billion under management.
With the change in Horizon ownership, Castle Harlan said no changes are anticipated for employees, labor agreements or customers. It plans to retain the current management team headed by chairman, president and chief executive Charles Raymond. Horizon is expected to keep its name.
Horizon, based in Charlotte, N.C., has about 1,600 employees company-wide.
About 100 work for Horizon in Hawai'i, including office staff and International Longshore & Warehouse Union workers. An average of about 75 to 80 additional stevedores work for Horizon daily on a part-time basis from another stevedoring company.
Marcel Fournier, the Castle Harlan managing director who led negotiations for the Horizon deal, said he hopes to build new activities related to shipping under the Jones Act, which regulates maritime trade between U.S. ports.
"We found a company that has a very solid reputation," Fournier said. The management is "doing a fine job, so our goal is to build on what they've achieved and continue to invest and continue to develop the business."
Fournier also said the nature of the business and the Jones Act provide high barriers to entry for potential competitors.
Horizon Lines started shipping to Hawai'i in 1987 as Sea-Land Service Inc. and operates a terminal at Sand Island. CSX bought the cargo line that year.
Horizon says it is the largest domestic ocean carrier, owning 16 vessels and about 21,700 cargo containers that handle 37 percent of marine container shipments between the U.S. Mainland and ports in Alaska, Hawai'i, Guam and Puerto Rico. It operates three sailings per week to Honolulu with continuing service to five Neighbor Islands.
Horizon had fiscal 2003 revenues of more than $830 million, up 9.6 percent from the previous year, Fournier said. Hawai'i shipping makes up about one-third of the business.
Castle Harlan, founded in 1987, has portfolio companies that include AdobeAir Inc., a manufacturer of evaporative coolers; Advanced Accessory Systems, a manufacturer of automotive roof racks and tow systems; and Associated Packaging Technologies, a manufacturer of frozen food containers. Castle Harlan recently announced its purchase of Caribbean Restaurants LLC, an operator of 165 Burger King restaurants in Puerto Rico.
The sale is expected to close within about two months. It is subject to Department of Justice and Maritime Administration approvals.
Senior management of Horizon will continue to share ownership of the company with the new investment firm, Fournier said.
With the sale to Castle Harlan, transportation firm CSX Corp. is divesting its part-ownership of Horizon Lines, Ullman said. CSX retained 20 percent ownership when it sold Horizon, then known as CSX Lines, to Carlyle.
Reach Kelly Yamanouchi at kyamanouchi@honoluluadvertiser.com or 535-2470.
