American Securities sells NEP in sprint ahead of "fiscal cliff"

NEW YORK Thu Dec 27, 2012 10:54pm GMT

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NEW YORK (Reuters) - Private equity firm American Securities LLC said on Thursday it sold a U.S. media production company to peer Crestview Partners, in one of the clearest examples yet of a firm rushing to close a deal before the end of the year to avoid a potentially larger tax bill.

NEP Broadcasting LLC, a Pittsburgh-based provider of trucks used as mobile production units for television networks such as ABC, Fox and ESPN, was sold to Crestview for roughly $800 million, two sources familiar with the situation said.

Jeff Marcus, a partner at Crestview, described the transaction as a 40-day sprint to the finish line from when the talks first started. The deal was signed on Monday and money changed hands the same day.

"It was important for American Securities to close the deal by the end of the year," Marcus said.

American Securities, which has over $8 billion in assets under management, declined to comment.

Taxes in the United States on capital gains - which American Securities would have to pay on the sale - could rise to 20 percent from 15 percent, unless politicians act on a December 31 deadline to avert the "fiscal cliff" of tax increases and spending cuts.

The tax issue has been controversial for private equity firms. Major private equity fund investors such as public pension funds and university endowments do not have to pay taxes on capital gains, so they want deal decisions to be driven by the profitability of the deal. Private equity fund managers, however, face tax bills on their cut of profits from deals, creating potential conflict of interest issues.

For New York-based American Securities, which traces its roots to a family office founded in 1947, the situation is more complex. The firm's investor base traditionally has included a large proportion of high net-worth individuals and families, who are taxed on capital gains.

American Securities acquired NEP from Apax Partners LLP and Spectrum Equity Investors in 2007. NEP was already also the biggest provider of independent television production studios and services in New York City.

NEP has increased revenue and its employee base by more than 75 percent since 2007, American Securities said. NEP employs over 700 engineers, technicians and other support staff, according to its website.

NEP was co-founded by Deb Honkus, who is the company's chairman, more than 30 years ago. She will remain invested in the company together with other members of management.

"NEP has grown to be the No. 1 provider of mobile broadcast facilities in the country. Under American Securities' ownership, they really undertook a significant upgrade of the equipment as high-definition broadcasting became predominant," said Marcus, of Crestview, which has about $4 billion of capital under management.

Barclays, UBS and AGM acted as financial advisers to NEP, while Morgan Stanley advised Crestview. Barclays, Morgan Stanley and GE Capital provided financing for the transaction. (Additional reporting by Soyoung Kim in New York; Editing by Steve Orlofsky and Leslie Adler)

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