The Carlyle Group and private equity firm Stellex Capital Management today announced a definitive agreement to acquire and merge Vigor Industrial LLC, an infrastructure, defense, and maritime services company based in Portland, Oregon, and MHI Holdings LLC, a ship repair, maintenance, and other ship husbandry services company based in Norfolk, Virginia.

Vigor is a major player in the cruise ship drydock market on the West Coast of the United States.

The combined company will create a bicoastal leader in critical ship repair services and commercial and defense-related fabrication services, according to a statement.

Key customers include the U.S. Navy, U.S. Coast Guard, Military Sealift Command, Boeing, cruise lines, fishing fleets, barges and ferry services for local and state governments, and other key commercial and defense customers.

The transaction is subject to customary closing conditions and is expected to close by the end of the third quarter 2019. Financial terms were not disclosed.

Frank Foti, President and CEO of Vigor, said: “Through this transaction, Vigor gains responsible, forward-thinking investors who will seek to build on our current platform while maintaining a values-driven culture. In addition, we are excited to join forces with a company of MHI’s caliber which has a history of delivering strong results and shares our mission to serve the people who protect our country every day. This evolution takes us where we want to go, growing sustainable jobs into the future. I’m excited to be an investor in this adventure and to be a part of what’s to come.”

Tom Epley, President and CEO of MHI, said: “MHI is stronger than it has ever been, and we’ve successfully executed our strategy of delivering cost effective maintenance and repair solutions to the U.S. Navy, a job we take very seriously.  We are excited to continue our partnership with Stellex and look forward to working with The Carlyle Group and our new colleagues at Vigor. The MHI leadership team and our 800 employees across MHI Ship Repair, Seaward Marine and Accurate Marine remain committed to our mission.”

Derek Whang, Principal at The Carlyle Group, said, “We look forward to working with our partners at Stellex, Vigor and MHI to create a stronger combined company of scale, capable of providing differentiated, coast-to-coast services to the U.S. Navy, U.S. Army and other defense, infrastructure, and maritime customers.  Together, Vigor and MHI are well positioned with their unique, national assets to grow in the highly attractive ship repair and fabrication markets, supported by compelling sector dynamics.”

David Waxman, Managing Director at Stellex Capital, said, “We are thrilled to have partnered with the MHI management team to grow the business over the last four years, including through the acquisitions of Accurate Marine and Seaward Marine, and look forward to working with the combined management teams as we expand our geographical and customer mix.  MHI’s commitment to its customers and its employees has been the foundation of its growth, and we welcome the partnership with Carlyle and Frank Foti in this next stage.”

The Carlyle Group will become majority owner of the combined company. Equity for the investment will come from the Carlyle U.S. Equity Opportunity Fund II, a $2.4 billion fund that focuses on middle-market and growth companies in the United States and Canada. As part of the transaction, Stellex Capital, MHI’s existing owner, will contribute new equity to the platform, while Vigor’s CEO Frank Foti will roll a portion of his existing Vigor ownership stake into the combined company.

A CEO search is underway for the new company. Tom Rabaut, former President and CEO of United Defense and a current Operating Executive at The Carlyle Group, and Admiral James Stavridis, a retired 4-star U.S. Navy officer, former NATO Alliance Supreme Allied Commander, and a current Operating Executive at The Carlyle Group, will both join the Board of Directors. Mr. Foti will also join the Board of Directors as Vice Chairman and will continue as Vigor’s CEO until a new CEO is retained. Tom Epley will continue to lead the MHI business.