Kinetics sets IPO on manufacturing unit

Special to CONTRACTOR MILPITAS, CALIF. Kinetics Holdings Corp., parent of mechanical giant Kinetics Group Inc., has filed a registration statement with the Securities and Exchange Commission to take its semiconductor manufacturing equipment business public. Kinetics Group ranked sixth in the nation in CONTRACTORs 2002 Book of Giants with mechanical revenues of $862.7 million (May, pg. 18). Many of

Special to CONTRACTOR

MILPITAS, CALIF. — Kinetics Holdings Corp., parent of mechanical giant Kinetics Group Inc., has filed a registration statement with the Securities and Exchange Commission to take its semiconductor manufacturing equipment business public.

Kinetics Group ranked sixth in the nation in CONTRACTOR’s 2002 Book of Giants with mechanical revenues of $862.7 million (May, pg. 18). Many of the firm’s customers are in the semiconductor manufacturing business.

The firm’s current corporate structure was formed in 1999 to facilitate the acquisition of Kinetics Group Inc. from United States Filter Corp., or USFilter, which was then a subsidiary of French conglomerate Vivendi S.A., in a management and investor-led buyout completed in August 2000.

Kinetics currently runs businesses that include turnkey process systems and operating services for electronics, biotechnology and pharmaceutical manufacturers. Those include traditional mechanical contracting functions, such as construction of clean rooms and installation of high purity piping.

The company also acquired businesses that produce gas and chemical delivery process module design and manufacturing for OEMs and integrated circuit manufacturers. Kinetics is selling this fluid systems business, which will be renamed Celerity Group.

The firm hopes to raise as much as $300 million from the IPO.

Following the IPO, the result will be two private companies and one public company, Celerity. The two private companies will be the construction operations, Kinetic Systems Inc., run by long-time President Kurt Gilson, and Kinetics Biopharm Inc.

KSI and KBI will have identical owners – the same executives and outside investors who participated in the 2000 buyout from USFilter. David J. Shimmon will remain as chief executive officer of the three companies. The holding company, Kinetics Group Inc., will be dissolved.

The purpose of the IPO is to repay debt incurred from the buyout. Most of Celerity’s competitors are public companies, so it made more sense to take the fluid delivery process module business public than it would to take the construction business public.

Concurrent with the completion of the IPO, Kinetics said in the SEC filing that it will repay the debt incurred in connection with the 2000 buyout and other corporate debt subsequently incurred. As of March 31, the firm had outstanding debt carried on its balance sheet of $288.7 million, net of a discount from the face amount of the debt of $15.2 million. The debt consists of term loans and revolving lines of credit from a syndicate of banks and lending institutions as well as promissory notes payable to institutional investors and to Vivendi, through USFilter.

About $169.6 million from the IPO and a $150 million “separation note” from Kinetics paid to Celerity means Celerity will begin its corporate life debt-free.

A Kinetics executive, who requested anonymity, noted that Kinetics is still a private company and would not comment on its finances or on the IPO, other than what is contained in its SEC filing.