Ferguson International, Inc.

Portfolio Analysis & Discussion

Acquisition Date:

Divestiture Date:

Held in Portfolio:

Purchase Price:

Sales Price:

% Gain:

Annualized R.O.R.:

Industry:

S.I.C. Codes:

October 17, 1996

April 30, 1999

30.5 months

US$ 925,500

US$ 5,000,000

440 %*

95 %*

Industrial Process Eqt Manufacturer

3564; 3523

Converted Tire Kickers

In January 1996, while evaluating a software company in the Dallas Area, Ferguson Industries was referred to InAmerica by a consultant who had formerly worked for the company. InAmerica met with the owner of Ferguson, and was impressed with both its history and its potential. The only real problem was the fact that the owner was interested more in what I would do to improve the company’s plight than it was in being acquired. This is not unusual in turnaround circumstances. The cost of a consultant is high, so the natural inclination is to cherry pick the analysis and conclusions of the consultant and avoid the cost. While it can be a waste of time, in some cases, when things get worse, reality forces the owner to change his mind. Ferguson was one of these instances.

The owner had built the company up over 40 odd years, selling to 40+ countries and becoming the world’s foremost authority on ammonia systems. See Dallas Times Herald Article. . . The company was a vendor to most major international construction companies and was the de facto leader in building fertilizer plants. See F.I. Brochure. . .

Prior to 1996, the founder and owner had some serious health problems which resulted in the reigns being turned over to his son. While otherwise, a very capable professional, the son was not suited to managing a distressed company- leading to a further erosion of the business. When InAmerica was called back in August of 1996, the Ferguson was facing imminent insolvency.

Still convinced of the company’s viability, InAmerica acted quickly to close the purchase of the Ferguson assets, and placing them into a new entity called Ferguson International.

Based upon an EPA mandate that all fossil fuel utilities install DeNOx systems to convert noxious chemicals escaping the process into the atmosphere, Ferguson was most likely to realize a significant numbers of those orders as a function of its expertise. However, because the company had eroded so much, it took 14 months to secure its first order. See Foster Wheeler DeNOx Order Press Release. . .

Within six months, Ferguson received a commitment from Fluor Daniel for a much larger system, effectively, resolving all remaining fiscal issues and forecasting a promising future in its key area of expertise. It was the securing of the Fluor Daniel project, that led to the agreement to sell Ferguson International to an international technology company dealing with pollution abatement. See Press Release. . .

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