American Capital Sheds Avalon Laboratories - Analyst Blog

Shares of American Capital, Ltd. (ACAS) jumped 1.72% on Friday, following the divesture of its portfolio company Avalon Laboratories Holding Corp. to Nordson Corp. (NDSN). Notably, Nordson is a world-leading precision fluid dispensing systems manufacturer.

The company and its affiliated fund – American Capital Equity III, LP (ACE III) -- received $180 million for the deal. The company has earned 19% compounded annual rate of return over the life of its investment, including dividends and fees.

Based in Los Angeles, Avalon designs and manufactures highly-specialized, single-use catheters and specialty medical tubing products for cardiology, pulmonology and related applications. Primary customers for the company include OEM customers in the cardiology, pulmonology, endovascular, bariatrics, tracheostomy, endoscopy, non-vascular stent and ophthalmic market segments.

Avalon was the first exit for ACE III. In spite of the global recession, the company recorded a solid financial performance, generating double-digit annual revenue and EBITDA growth.

American Capital directly and through its asset management business initiates, underwrites and manages investments in middle-market private equity, leveraged finance, real estate and structured products. Since its IPO in 1997 through the second quarter of 2014, the company has earned a 23% compounded annual return on the exit of its equity investments, including dividends, fees and net gains.

American Capital carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the same industry include Medallion Financial Corp. (TAXI) and Apollo Investment Corp. (AINV). Both companies carry a Zacks Rank #2 (Buy).

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