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Carlyle Group, Stellex to Form Naval Ship Repair Company Through Vigor-MHI Merger

Jeff Brody

The Carlyle Group (Nasdaq: CG) and Stellex Capital Management have agreed to buy Portland, Ore.-based defense and maritime services firm Vigor Industrial and combine it with Stellex-owned MHI Holdings for an undisclosed sum to form a combined ship repair and fabrications services company.

Carlyle said Thursday that it will become a majority owner of the combined entity, which will provide ship repair support to defense, state and local government agencies and commercial clients. The deal is expected to be finalized by the end of the third quarter of 2019, subject to customary closing conditions.

Vigor has approximately 2,300 employees and provides ship repair and fabrication services for defense, aerospace and infrastructure customers through its eight drydocks across Alaska and the Pacific Northwest. Norfolk, Va.-based MHI offers ship maintenance, repair, hull cleaning and ship husbandry services to the U.S. Navy and Military Sealift Command.

“We look forward to working with our partners at Stellex, Vigor and MHI to create a stronger combined company of scale, capable of providing differentiated, coast-to-coast services to the U.S. Navy, U.S. Army and other defense, infrastructure, and maritime customers,” said Derek Whang, principal at The Carlyle Group. “Together, Vigor and MHI are well positioned with their unique, national assets to grow in the highly attractive ship repair and fabrication markets, supported by compelling sector dynamics,” Whang added.

Vigor CEO Frank Foti will serve on the combined entity’s board as vice chairman and offer a portion of his ownership stake into the new company. Carlyle’s operating executives Tom Rabaut and James Stavridis will join Foti as members of the board. Foti and MHI President and CEO Tom Epley will continue to serve in their respective roles until a new CEO is appointed at the combined firm.

BNP Paribas, BofA Merrill Lynch and Credit Suisse have agreed to offer debt financing for the deal. Latham & Watkins LLP acted as legal adviser to Carlyle and Stellex, while DLA Piper advised Stellex and MHI on the transaction’s legal aspect. Capstone Headwaters and K&L Gates LLP respectively served as financial and legal advisers to Vigor.

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