Juniper Industrial Holdings, Inc. CEO Roger Fradin and CFO Brian Cook
The industrials sector is ripe with acquisition opportunities, thanks to attractive cash-flow dynamics, a relatively stable market, and meaningful barriers to entry. That’s according to Roger Fradin and Brian Cook, CEO and CFO, respectively, of Juniper Industrial Holdings – a special-purpose acquisition company (SPAC) that recently raised $345 million in its IPO. The SPAC will use the funds to find an acquisition target in the industrial sector – a space where the two former Honeywell International Inc. executives worked together on dozens of M&A deals. The full interview is below:
IPO Edge: What are the characteristics of the industrials sector that make it a good hunting ground for your newly-listed SPAC?
Messrs. Fradin and Cook: Juniper Industrial Holdings has deep experience in both operating and acquiring diversified industrial businesses; therefore, we are approaching our search with an insider’s perspective. Unlike the recent flurry of IPOs associated with tech-related assets, we have found that most industrial companies offer potential investors attractive cash-flow dynamics, which could allow for dividends, share repurchase, growth investments and a healthy M&A pipeline. Most industrial companies operate within a more stable market, making themselves less susceptible to market disruptions. For example, secular growth trends continue to prevail against cyclical trends. Moreover, industrials are often critical to the overall health and stability of the global economy with their steep involvement in distribution, defense and supply chain and logistics. These same segments are often driven by industry codes and standards that can help sustain their business models while presenting meaningful barriers to entry.
IPO Edge: SPACs can allow companies to tell more complicated stories involving mergers, divestitures, or other transformational plans. Is Juniper willing to consider such a strategy or is it more focused on a company with a simple core business?
Messrs. Fradin and Cook: Juniper’s management team has a long history of creating leading industrial platforms through value-enhancing bolt-on acquisitions. We have our eye on several fragmented industries in which we would be able to acquire a company and execute a similar strategy. However, we are open to acquiring an asset in a consolidated subsector if it has other attractive upsides such as the potential for global expansion or a unique channel presence. Juniper is focused on identifying a company that will benefit from our robust leadership, industry experience and is open to growth through M&A and other value creation plans.
IPO Edge: Roger, you were instrumental in Vertiv Holdings Co. going public. Are there any lessons you learned that you can use in your position with Juniper Industrial Holdings?
Mr. Fradin: As a member of the board of directors for Goldman Sachs Acquisition Holdings, I learned a few crucial lessons in creating value through the SPAC process that led to Vertiv becoming a public company. In order to have a successful SPAC, Brian and I must focus on finding a company that falls within, or parallel, to the industrial sectors we have worked with in the past. We believe this will give us both the best chance to create the most value for our shareholders, and generates immediate credibility for the SPAC with its current and future investors. Additionally, we’d ideally like to find a company that has good growth dynamics, a thoughtful capital structure and has the potential to roll other businesses into it. Last, but definitely not least, it is important to find a company that has senior leaders that have not only passion for what they do, but also an in-depth knowledge of their field.
IPO Edge: Brian, you have worked on dozens of industrials deals, which clearly should give you an advantage looking for a target. Are there any specific aspects of your previous role that will help you with JIH?
Mr. Cook: Absolutely. During my tenure at Honeywell, I led over 60 buy- and sell-side transactions. During this, I have garnered in-depth knowledge of many different industrial segments, which helped me quickly evaluate opportunities that have potential…and those that did not. Roger and I have record of accomplishment for identifying new and attractive areas and finding related assets that can complement each other. We have done this in the safety, gas detection and bar code scanning/mobile computing fields successfully. I believe our collective experiences have led us to this point in our careers where we can help lift the right private company to excel on the public market.
IPO Edge: IPO Edge has interviewed bankers in the SPAC space who talk about the importance of “multiple arbitrage” – that a privately-held company can be bought through a SPAC for less than comparables trade in the public market. Does that opportunity exist in the industrials sector?
Mr. Cook: In short, yes. The recent market pull back notwithstanding, we continue to see high quality industrial assets trade at robust levels in the public markets. Roger and I both firmly believe that the “best SPAC assets” are those companies in areas that will be in demand by the public markets (e.g., aerospace, automation and industrial technology), will be well-covered by research analysts and have favorable trading comps.
IPO Edge: We have recently seen SPACs branch into acquisitions of growth companies that aren’t yet public, like Virgin Galactic Holdings, Inc. Would you consider such a target or is profitability a requirement?
Mr. Cook: Given our extensive background and experience, we believe that we can deliver the most value to investors through a transaction with an industrial company. It is our belief that this sort of deal would present favorable cash flow dynamics for investors. Roger and I want to be able to tell our investors that we know the space, or the business model, have a solid investment thesis and ultimately, believe Juniper can make the business grow.
Roger Fradin has more than 40 years of operating experience across a wide range of industrial verticals. He joined Honeywell in 2000 when Honeywell acquired Pittway Corporation. Fradin served as president and chief executive officer of Honeywell’s Automation and Control Solutions business from January 2004 to April 2014. He was vice chairman of Honeywell from April 2014 until his retirement in February 2017. Roger is also a consultant for The Carlyle Group and an advisor to Seal Rock Partners. He received his M.B.A. and bachelor’s degrees from The Wharton School at the University of Pennsylvania, where he has also served as a member of the faculty. Fradin is currently a director of Vertiv Holdings (NYSE: VRT), L3Harris Technologies Inc. (NYSE: LHX), Resideo Technologies Inc (NYSE: REZI) and Juniper Industrial Holdings, Inc. (NYSE: JIH.U) (“JIH”), and was formerly a director of MSC Industrial Direct Co., Inc. (Nasdaq: MSM) and Pitney Bowes Inc. (NYSE: PBI).
Brian Cook has more than 20 years of experience within mergers and acquisitions, business development, and strategic planning across a wide range of industrial verticals. He has led the execution of more than 50 buy- and sell-side transactions during his 17 tenure at Honeywell where he was the Global Head of M&A and VP of Corporate Development. Prior to Honeywell, Cook was a Director, Transaction Services at PWC. He has a B.S. in Accounting from the University of Rhode Island.
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