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January 3, 2007

Jim Crane proposes to take EGL private

Last year, the Houston business community saw Kinder Morgan bail out of the increasing headache of operating as a public company. With the coming of the new year, Houston-based EGL announced that it is going private in a $1.2 billion deal led by its CEO, Jim Crane, and private equity firm General Atlantic.

EGL stands for EGL Eagle Global Logistics, which provides services such as supply-chain management, warehousing and freight forwarding for business and government air and marine shipments. The company earned $58.2 million in 2005 and had net income of $45.4 million through the first nine months of 2006. Crane founded EGL about 20 years ago in Houston, took it public over a decade ago, and remains its largest shareholder with 18%. General Atlantic has proposed to pay $36 a share for the rest of the stock, which would generate a 21% premium over the company’s $29.78 closing price as of Dec. 29. Crane and General Atlantic have secured $1.13 billion in financing, and the balance of the proposed purchase price would consist of equity contributed by General Atlantic, Crane and other senior EGL executives. EGL's board has formed a committee to study the offer.

As noted here in regard to the Kinder Morgan deal (also noted here in regard to New York City), the EGL deal is a direct result of the increased cost of public equity resulting from the ill-advised regulatory maze that government has imposed on public companies in the post-Enron era. As Professor Bainbridge says, "legislate in haste, repent at leisure." As is all too common, the governmental solution to business scandals is more harmful to its investor-citizens than the business scandals themselves.

Posted by Tom at January 3, 2007 4:22 AM

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