Waukesha-based Generac Power Systems is among the companies interested in bidding on the assets of Wauwatosa-based Briggs & Stratton Corp., according to bankruptcy court filings.
Briggs filed for Chapter 11 bankruptcy in July after securing a $677.5 million debtor-in-possession financing package from its lenders and New York-based private equity firm KPS Capital Partners. KPS also agreed to acquire substantially all of Briggs’ assets for $550 million, with that offer acting as the stalking horse bidder for the court-supervise sale of the company.
Generac objected this week to the proposed bid procedures, arguing the sale process is on an unreasonably compressed timeline, does not maximize value for creditors and gives KPS undue influence. Generac also says it has been given limited access to due diligence information needed to formulate a potential bid.
In its objection, Generac says it “has significant interest in acquiring certain assets of the debtors’ businesses,” noting Briggs’ offerings in power generation, light towers, heaters and commercial lawn and garden markets align and complement Generac’s business.
Generac is not the only interested party to object to the sale process proposed by Briggs. A group holding some of the $195 million of Briggs notes maturing in December, which served as a catalyst to the bankruptcy filing, questioned if the sale process would maximize value of the company.
The bid procedures are scheduled to be discussed at a hearing next week with a potential auction on Sept. 1 and sale hearing on Sept. 11. Generac noted that the timeline gives potential bidders just 39 days to complete their due diligence and submit a bid to compete with the KPS offer “that took months of negotiations to finalize.”
When Briggs and its advisors were seeking new financing before the bankruptcy filing, they reached out to more than 100 potential investors before ending up with the KPS deal. Generac says it was not among those contacted prior to the filing and first asked for access to due diligence information on July 21, just after the bankruptcy filing.
Generac says it returned a signed non-disclosure agreement July 23 and 24 and was provide access to some data three days later. That data included about 30% of available files and included limited information on individual business performance.
“No business-level projections have been made available,” the objection says. “Without making such information available, it becomes impossible for any potential bidder to evaluate or make a bid for any portion of the business assets, or to credibly assess business-level synergies that would allow bidders to conduct a true value of the entire company.”
Generac says it received access to a more restricted level of due diligence information July 30, but much of it was redacted.
Steve Goran, executive vice president – global corporate development at Generac, reached out to Briggs’ investment banker on July 31 to express concern about not having the data “needed to bid aggressively.” He suggested Briggs provide access specifically to Generac’s corporate development team specifically.
“We view the overall competitive overlap between Generac and Briggs as minimal and providing direct access limited to my corporate development team (separate from Generac commercial businesses) should be acceptable,” Goran wrote.
Ed Chapman Jr., a director at Houlihan Lokey, responded that Briggs has “heightened sensitivity around providing certain information to entities with whom they compete with but agree as it relates to Generac there should be less overall concern.”
Chapman suggested it would be helpful if Generac provided a specific list of the items it needed.
Generac says it submitted a 17-item priority request list on Aug. 3 but has not received all the items it requested.
“These due diligence issues are exacerbated by the compressed timeline the debtors propose. Bidders are already playing catch-up and are hampered by the lack of easy access to due diligence information,” the objection says.
Generac is also taking issue with how the procedures would treat bids for the parts of Briggs & Stratton that KPS is proposing to buy, noting that to qualify bids need to exceed the $550 million price KPS offered.
“This leaves potential bidders who want to bid on a subset of assets in a quandary: find other bidders who want to combine bids prior to the bid deadline (without knowing who all of the other bidders might be), or submit a bid that may be rejected because it is not ‘qualified,’” the objection says.
Chapman told Goran in a July 24 email that a group of bids for parts of the business could be deemed as qualifying if they totaled more than the KPS bid, but “we will not look to combine bidders ahead of the bid deadline date.”
“It is unreasonable and unfair to exclude bids for a subset of the assets at the qualification stage,” Generac’s objection says. “If the goal is to 'maximize value,' subset bidders should be allowed to participate in an auction and combine with similar bidders then and there. Debtors’ process would unfairly exclude such bids unless they align perfectly as of the expedited bid deadline.”