Compass Diversified Holdings announced an agreement to purchase The ERGO Baby Carrier, Inc., a designer and marketer of products and accessories for babies.
Compass Diversified Holdings reported that the enterprise value of the transaction, which includes consideration paid and assumption of debt, was $91 million. The company reported that this was approximately seven times the estimated EBITDA for The ERGO Baby Carrier, Inc., in 2010.
Compass Diversified Holdings has elected to classify the purchase under Section 338 (h) (10) of the Internal Revenue Code. This allows the company to amortize the cost of the purchase over several years.
Compass Diversified Holdings will own 84% of The ERGO Baby Carrier, Inc. after the transaction closes. The company will draw on its credit facility to fund the cost of the acquisition.
The ERGO Baby Carrier, Inc. is headquartered in Pukalani, Hawaii, and reported sales of $22.8 million in 2009. The company’s products are sold in hundreds of retailers in twenty countries.
Compass Diversified Holdings said that the acquisition would be immediately accretive to Cash Flow Available for Distribution, a metric that the company uses to measure financial performance.
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