Bristol, Virginia
Leading distributor of coal mining supplies to underground coal mining operations
Investment Date: August 1999
Exit Date: August 2004
CHS acquired United Central Industrial Supply Company in August 1999. At the time, coal production in the Appalachian region had been flat for several years. Industry insights gained through Utiliserve, Inc., an investment in an earlier CHS fund, helped us develop our investment thesis at United Central. We forecasted an increase in the amount of coal mined in the Appalachian region and identified an opportunity to increase equity value through the consolidation of the coal mining distribution industry.

CHS and United Central led the consolidation of coal mining distributors with the acquisition of National Mine Service, a distributor of specialty mining and industrial products, general mine supplies and safety products. The purchase of National Mine Service in August 2001 added distribution branches in the Western United States, Alabama and Canada and allowed United Central to become a national distribution platform. National Mine Service also provided United Central with exclusive distribution agreements for leading mine safety products. With the product line additions, United Central became the only full line supplier of consumable mine supplies, an attractive offering for mine operators looking to shed their internal supply operations.

CHS and the management team worked through financial difficulties at several customers and in 2003, negotiated supply agreements with two major underground coal producers to provide a majority of their consumable supplies. By 2004, CHS and the management team had positioned United Central for growth after three years of retrenching and strengthening its client base, expanding its geographic presence and acquiring several exclusive product distribution agreements.

Also by 2004, the coal industry experienced renewed activity. Pricing and coal production volume surged primarily to meet electricity generation demands and the outlook for Appalachian coal rebounded. Seeing strength in domestic coal markets, new mine openings and high demand for coal mining supplies, CHS retained an advisor in early 2004 to manage a broad sale process.

The sale of United Central extends CHS’ track record with distribution companies. CHS’ investment origination efforts will continue to target distribution companies like United Central, with consistent earnings growth, diversified supplier and customer bases and attractive cash flow characteristics.

Case Studies have been selected for illustrative purposes. The specific portfolio companies identified are not representative of all active or prior CHS Capital portfolio companies; results may not be typical and it should not be assumed that investments in other portfolio companies will be or were as profitable. For complete listings of active and prior portfolio companies please visit the "Portfolio" section of the website. Investments in a fund involves significant risk, including loss of the entire investment.