ATHOL — In an agreement expected to be finalized later this year, precision tool manufacturer L.S. Starrett announced that it will transition from a public to a private company and merge with MiddleGround Capital, a private equity firm.
The proposed “go-private” transaction has been approved by Starrett’s board of directors, and the deal is expected to close in mid-2024, subject to approval by Starrett’s shareholders, according to the announcement.
Douglas A. Starrett, chair of the board of directors, CEO and president, said the deal came about because as a public company, L.S. Starrett has to incur significant costs related to U.S. Securities and Exchange Commission filings and audits, among others. All told, he said this amounts to approximately $3 million annually. Starrett added that he has noted this before in the company’s annual report.
“The continued costs of being a small company have continued to escalate with more regulations,” he said.
Starrett said that as a private company, L.S. Starrett will have additional financial and operational flexibility to continue providing industry-leading service and products to its customers across its markets, as well as maintain its “proud tradition among its employees, communities and other stakeholders.”
According to its website, MiddleGround Capital works with companies in the industrial and specialty distribution sectors, which is why the Athol-based manufacturer chose to work with them on the merger, said Starrett.
“We are pleased to reach this agreement with MiddleGround, which provides a meaningful premium cash value to our shareholders,” Starrett said in a statement. “Following comprehensive outreach to potential parties, our board of directors determined that MiddleGround is the right partner for Starrett because of its deep knowledge within the manufacturing industry.”
Founded in 1880 by Laroy S. Starrett and incorporated in 1929, the L.S. Starrett Co. is a manufacturer of high-end precision tools, cutting equipment and metrology systems, and is engaged in the business of manufacturing more than 5,000 different products for industrial, professional and consumer markets.
In a “go-private transaction,” the company can elect to terminate its status as a public company. Under Security and Exchange Commission rules, a company may elect to go private when it is owned, directly or indirectly, by fewer than 300 persons.
“MiddleGround is thrilled to be partnering with Starrett, a brand we have long admired and a company that we have followed in the public markets for several years,” John Stewart, managing partner of MiddleGround, said in a statement. “Most of MiddleGround’s operations team gained familiarity with Starrett products over the course of their manufacturing careers, and we are excited about the opportunity to further position the company for its future on the front lines of innovation, advanced manufacturing and reshoring.”
Following completion of the transaction, Starrett will become a wholly owned subsidiary of MiddleGround and its Class A common stock will no longer be listed on any public market.
Starrett’s merger with MiddleGround Capital is an all-cash transaction for $16.19 per share, according to the announcement. The purchase price represents an approximately 63% premium to the closing stock price of the company’s stock on March 8, the last trading day prior to announcing the transaction. Shares will not be available for the public or employees to buy following this merger.
MiddleGround Capital is a private equity firm based in Lexington, Kentucky, with more than $3.5 billion of assets under management.
Max Bowen can be reached at 413-930-4074 or at mbowen@recorder.com.
