Universal Stainless to Purchase Assets of Patriot Special Metals
06/15/2011 - Universal Stainless & Alloy Products has signed an agreement to purchase the assets of Patriot Special Metals, a substantially completed greenfield facility located in North Jackson, Ohio.
Universal Stainless & Alloy Products, Inc. has signed an agreement to purchase the assets of Patriot Special Metals a substantially completed greenfield facility located in North Jackson, Ohio.
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In a separate action, the Universal Board of Directors approved a $6-million capital expenditure for the addition of an Electro Slag Remelt Furnace to be installed in North Jackson. The company said the new ESR will help to enhance its ability to respond to the recovery in power generation demand.
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According to Universal, the acquisition will broaden the company’s production capabilities, expand its product range in higher value, higher margin products, and enable its entry into new market niches. Specifically, the addition of the largest hydraulic radial forge in the Western Hemisphere will expand the company's products to include large and long forged squares, rounds, bars and custom shapes for aerospace, power generation, petrochemical and general industrial tool steel and shafting applications. Numerous specialty metals producers have also expressed strong interest in utilizing the unique characteristics of the radial forge to supplement their in-house hot working capacity.
Adding VIM - VAR capability will also enable the company to enter selected global high nickel alloy and super alloy markets for aerospace parts, landing gear, helicopter rotor masts and gears and non-magnetic drill collars for oil and gas exploration.
The company said the radial forge will also make a significant positive contribution to Universal's commitment to providing unparalleled customer service by further reducing cycle and lead times on existing business. The ability to process larger, longer pieces is expected to improve yields while producing excellent cross sectional integrity. Lastly, the additional business acquired due to the capabilities of the forge will increase the utilization of the recently-upgraded melt shop at the Bridgeville plant.
“This acquisition will significantly strengthen our industry position, enabling Universal to better respond to the needs of customers and to seize additional global opportunities in the Aerospace, Power Generation, Petrochemical and Heavy Industrial markets,” commented Chairman, President and CEO Dennis Oates. “We expect that with the addition of the North Jackson facility, the company will substantially increase revenues and more than double net income by 2014. This is a transformative step that will fast-track the execution of our strategy to accelerate growth and increase shareholder value.”
The purchase price for the assets is $104.5 million subject to certain adjustments and an additional $25 million for the completion of equipment installation. Universal will fund the initial transaction and subsequent capital requirements through a combination of internal cash, bank financing and a $20-million convertible note to the seller. PNC Capital Markets LLC will act as Lead Arranger and Administrative Agent on new credit facilities to finance the acquisition.
The transaction is expected to close by the end of July 2011, subject to customary closing conditions including regulatory approvals and the completion of bank financing. It is expected to be accretive to earnings in the first quarter of 2012 when the facility will be fully operational.
Headquartered in Bridgeville, Pa., Universal Stainless & Alloy Products manufactures and markets semi-finished and finished specialty steels, including stainless steel, tool steel and certain other alloyed steels. Established in 1994, the company’s experience, technical expertise, and dedicated workforce stand committed to providing the best quality, delivery, and service possible.
