Vigor Industrial LLC

Vigor Industrial LLC, majority-owned by CEO Frank Foti, is a provider of complex fabrication and ship repair services. It employs 2,300 people and operates eight drydocks across the Pacific Northwest and Alaska, including the largest floating drydock in North America. Vigor excels at ship repair, specialized shipbuilding, and other complex fabrication projects in support of aerospace, defense, and infrastructure end markets. While the company is widely known for building ferries, it also builds high-performance military craft for the United States and other allied foreign governments.

The Carlyle Group and Stellex Capital management announced July 25, 2019 plans to acquire and merge maritime and defense companies Vigor Industrial and MHI holdings. The combined company will create a bicoastal leader in critical ship repair services and commercial and defense-related fabrication services. Key customers include the U.S. Navy, U.S. Coast Guard, Military Sealift Command, Boeing, cruise lines, fishing fleets, barges and ferry services for local and state governments, and other key commercial and defense customers. The transaction is subject to customary closing conditions and is expected to close by the end of the third quarter 2019. Financial terms were not disclosed.

MHI Holdings LLC, owned by Stellex Capital, is a leading provider of full-range ship maintenance, repair, and modernization services to the U.S. Navy and Military Sealift Command in Norfolk, Virginia. MHI also provides hull cleaning, ship husbandry services, underwater painting and inspections, wastewater treatment, and chemical cleaning services globally. MHI is one of the only private shipyards in Norfolk that can service large surface combatants and amphibious ships.

Frank Foti, President and CEO of Vigor, said, “Through this transaction, Vigor gains responsible, forward-thinking investors who will seek to build on our current platform while maintaining a values-driven culture. In addition, we are excited to join forces with a company of MHI’s caliber which has a history of delivering strong results and shares our mission to serve the people who protect our country every day. This evolution takes us where we want to go, growing sustainable jobs into the future. I’m excited to be an investor in this adventure and to be a part of what’s to come.”

Tom Epley, President and CEO of MHI, said, “MHI is stronger than it has ever been, and we’ve successfully executed our strategy of delivering cost effective maintenance and repair solutions to the U.S. Navy, a job we take very seriously. We are excited to continue our partnership with Stellex and look forward to working with The Carlyle Group and our new colleagues at Vigor. The MHI leadership team and our 800 employees across MHI Ship Repair, Seaward Marine and Accurate Marine remain committed to our mission.”

Derek Whang, Principal at The Carlyle Group, said, “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. 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.”

David Waxman, Managing Director at Stellex Capital, said, “We are thrilled to have partnered with the MHI management team to grow the business over the last four years, including through the acquisitions of Accurate Marine and Seaward Marine, and look forward to working with the combined management teams as we expand our geographical and customer mix. MHI’s commitment to its customers and its employees has been the foundation of its growth, and we welcome the partnership with Carlyle and Frank Foti in this next stage.”

The Carlyle Group will become majority owner of the combined company. Equity for the investment will come from the Carlyle U.S. Equity Opportunity Fund II, a $2.4 billion fund that focuses on middle-market and growth companies in the United States and Canada. As part of the transaction, Stellex Capital, MHI’s existing owner, will contribute new equity to the platform, while Vigor’s CEO Frank Foti will roll a portion of his existing Vigor ownership stake into the combined company.

A CEO search is underway for the new company. Tom Rabaut, former President and CEO of United Defense and a current Operating Executive at The Carlyle Group, and Admiral James Stavridis, a retired 4-star U.S. Navy officer, former NATO Alliance Supreme Allied Commander, and a current Operating Executive at The Carlyle Group, will both join the Board of Directors. Foti also joined the Board of Directors as Vice Chairman and continued as Vigor’s CEO until a new CEO was retained. Tom Epley continued to lead the MHI business.

Vigor got its start in 1995 when Frank Foti purchased the ailing ship repair company Cascade General. Inspired by the passion and skill of second and third generation shipyard workers that called the company home, Foti set out to create a new kind of manufacturing company, values-driven and people inspired. In the face of a declining market he began the company’s turnaround. He developed innovative financing structures and labor strategies. He privatized the shipyard, restructured the company’s debt and steadily grew the business. By 2010, the industry had stabilized and Frank was ready for expansion.

Vigor expanded into the Puget Sound with acquisition of Todd Pacific Shipyards in 2011. Todd brought a 100 year tradition of shipbuilding and ship repair to Vigor as well as access to the vibrant maritime community in Seattle with its diverse customer base. One year later, Vigor further expanded its reach with the acquisition of Alaska Ship & Drydock in Ketchikan, Alaska, making the company the largest ship repair operation in the region.

With Vigor’s geographic and ship repair reach broadened and deepened, Frank set out to strengthen the company’s fabrication capabilities. In 2014, a merger was finalized between Vigor and Oregon Iron Works (OIW). Founded in 1944, OIW was a pioneering force in advanced manufacturing and complex metals fabrication. Its exceptionally skilled workforce brought to Vigor a proven track record of success as a structural fabricator in aerospace, high performance military crafts, nuclear products, infrastructure and energy. Today the former workers of Oregon Iron Works, make up Vigor’s complex fabrication teams and serve in leadership and project management positions throughout Vigor, applying processes and work strategies across engineering disciplines to strengthen fabrication in every area of the company.

The following year in 2015, Vigor acquired Kvichak Marine Industries, an industry leader in quality aluminum workboat fabrication. Once a competitor of OIW in the aluminum sector, the former Kvichak and OIW teams are now united as Vigor and competing for and winning major contracts in the maritime security and workboat markets.

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