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Carpenter Technology to Acquire Latrobe
06/21/2011 - Carpenter Technology Corp. and Latrobe Specialty Metals, Inc. have entered into a definitive merger agreement whereby Carpenter will acquire Latrobe in a transaction valued at approximately $558 million. Closing is expected to occur during the first quarter of FY2012, which ends September 30, 2011.
Carpenter Technology Corp. and Latrobe Specialty Metals, Inc. have entered into a definitive merger agreement whereby Carpenter will acquire Latrobe in a transaction valued at approximately $558 million.
In the transaction, 8.1 million shares of Carpenter stock, subject to certain adjustments for working capital and pension, representing a current equity value of approximately $388 million, will be issued to the current owners including Hicks Equity Partners and The Watermill Group. Carpenter will also pay $170 million in cash to eliminate Latrobe debt at closing and reimburse certain transaction costs.
Acquired by Hicks Equity Partners and The Watermill Group in December 2006, Latrobe manufactures and distributes high-performance materials for aerospace, defense, energy, and other significant applications with manufacturing operations in Pennsylvania, Ohio, Texas, and the U.K. and seven distribution centers located throughout the U.S. Annual revenues and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) for the twelve months ending March 31, 2011, were $379 million and $58 million, respectively.
“Our strategy is to grow through a combination of organic growth initiatives and acquisitions, with a focus on markets that value the technical sophistication of our products," said William A. Wulfsohn, President and Chief Executive Officer of Carpenter Technology. "The Latrobe acquisition will provide needed capacity to meet strong customer demand for our premium products, improves our position in attractive segments like aerospace and energy, provides capabilities that will help us commercialize important new product offerings, and offers us improved returns on new capability investments.
“We expect the acquisition to be accretive in year one, even including the one-time costs associated with the merger, and highly accretive in future years. Annual net synergies are anticipated to be in excess of $25 million. The combined entity should be a strong cash generator, with improved growth potential.”
As part of the transaction, Thomas O. Hicks, Chairman and Chief Executive Officer of Hicks Equity Partners, and Steven E. Karol, Managing Partner and Founder of The Watermill Group, will join Carpenter’s Board of Directors.
Latrobe’s shareholders will own approximately 15.5% of Carpenter’s outstanding common stock. The transaction is subject to customary closing conditions and regulatory approvals. Closing is expected to occur during the first quarter of FY2012, which ends September 30, 2011.
Carpenter Technology produces and distributes conventional and powder metal specialty alloys, including stainless steels, titanium alloys, tool steels and superalloys.
Latrobe Specialty Metals employs more than 800 people across the world. It supplies essential materials to the aerospace, defense, energy, hydrocarbon, medical, and industrial steel sectors.
Hicks Equity Partners (HEP) is the private equity arm for Hicks Holdings LLC, a holding company for the Thomas O. Hicks family’s assets. HEP looks for established companies with proven track records, strong free cash flow characteristics, a strong competitive industry position, and an experienced management team looking to partner with long-term capital.
The Watermill Group is a strategy-driven private investing firm that revitalizes companies to drive superior returns. For more than three decades, The Watermill Group has been acquiring, operating, and improving companies. The Watermill Group’s other portfolio companies include FutureMark Paper Co., C&M Corp., and MultiLayer Coating Technologies, LLC.
