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Starrett Sold to a Private Equity Company

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Starrett announced this week that the company has entered into an agreement to be sold to “an affiliate of MiddleGround Capital,” a private equity firm.

This means that Starrett, which specializes in precision layout tools and select saw blade products, will be transitioning from a publicly-traded to a privately-owned company.

Starrett’s stock price jumped up by around 60% at the news, landing close to the purchase price of $16.19 per share.

The move is described by Starrett as a “merger agreement” and “go-private transaction,” but seems more like an acquisition by the private equity and investment firm.

Basically, it seems to me that Starrett was essentially purchased by the private equity company. I don’t see how this is a “merger,”

Starrett says that the transaction is expected to close in mid-2024, subject to shareholder approval and other conditions.

I’m not familiar with MiddleGround Capital, and there’s not much history to dig up, other than an apparent inclination towards acquiring B2B engineering and specialty companies.

In their announcement, Starrett added:

As a private company, the Company will have additional financial and operational flexibility to continue providing industry-leading service and products to our customers across our markets and maintaining Starrett’s proud tradition among its employees, communities and other stakeholders.

How vague.

The question to ask is whether this will be good for tool users.

Will MiddleGround Capital invest in the Starrett brand, or did they essentially acquire the brand for the name?

I purchased several Starrett products in recent years, and returned some of them due to poor quality and cut corners. Not to mince words, I’m not optimistic about this news.

On the other hand, we don’t know a lot about the particular private equity firm that is acquiring Starrett. It’s possible that, with fresh cash investment, Starrett can enter a new and even better chapter.

Or, the investment company might seek to boost the brand’s value in any way possible, to position Starrett for a profitable future sale to another company.

Thanks to ITCD for the heads-up!