Castle represents an exciting ±$30M corporate divestiture opportunity (selling a division of ParentCo) as either a platform or add-on acquisition to financial and strategic buyers. Castle contract manufactures highly engineered products to OEMs spec for HVAC, electronics, pharma, automotive, military, powersports, EV, industrial products and other product manufacturers. The ParentCo manufactures branded products that are sold directly into another industry. Castle’s parent began construction of a new manufacturing plant and will relocate all their attention and branded products to that facility. The ±$30M contract manufacturing division will remain at the existing facilities.

The contract manufactured products are technical in nature and made from a wide variety of raw materials to achieve the specific technical attributes and outcomes spec’d by customers. With diverse end markets, it’s likely you own a product with Castle components. They can be found in thousands of technical applications. The Company enjoys a diverse customer base with the top five generating 12%, 9%, 8%, 7%, and 7% of revenue.

Castle is led by an experienced team of manufacturing, operations and sales professionals who will remain with the division. Opportunities to participate in ownership (with either a strategic or financial buyer) are welcomed. The industry is large but geographically fragmented. It’s possible to grow this business by acquiring other technical contract manufacturers in other geographies.

Castle’s Parent Company will retain senior finance, HR and IT staff so those G&A areas will need to be replaced. Management estimates $500k will cover the cost of replacing this staff and we have already adjusted EBITDA to reflect this ($4M EBITDA reduced by $500k for replacement of these G&A staff). ParentCo seeks some flexibility as they move their branded operations out of the Company’s current plant. They expect to move out in April or May of 2023. After the move, the contract manufacturing division will have ample room for growth and can support tripled revenue in current facilities. All key operations and sales leaders stay with this division. They currently run the division. The ParentCo CFO will support transitioning the finance function to a new CFO. The business is highly professionalized today and they don’t expect a heavy lift in supporting hiring new leaders for HR, IT and finance.

This is a very professionally operated company and the division benefits from being part of a well-run organization. The division hasn’t been the priority of the Company, rather, the companies own branded products have received most of ParentCo’s attention and resources. It will be great to align with a strong financial or strategic partner who wants to grow this operation.