Carpenter Technology Corporation and Latrobe Specialty Metals Inc announced they have entered into a definitive merger agreement whereby Carpenter will acquire Latrobe in a transaction valued at approximately USD 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 USD 388 million, will be issued to the current owners including Hicks Equity Partners and The Watermill Group. Carpenter will also pay USD 170 million in cash to eliminate Latrobe debt at closing and reimburse certain transaction costs.
Latrobe’s shareholders will own approximately 15.5% of Carpenter’s outstanding common stock.
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 United Kingdom and seven distribution centers located throughout the United States. Annual revenues and EBITDA for the twelve months ending March 31st 2011 were USD 379 million and USD 58 million respectively.
As part of the transaction, Mr Thomas O Hicks chairman & CEO of Hicks Equity Partners and Mr Steven E Karol Managing Partner and Founder of The Watermill Group will join Carpenter’s Board of Directors.
Mr William A Wulfsohn president & CEO of Carpenter Technology said “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. 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 consider Latrobe an important extension of Carpenter’s capabilities and are very proud of our new partnership. By combining the two companies we will improve product mix, lower cost, and reduce required capital investments for future growth.
Mr Steven E Karol said “We are proud of what Latrobe has accomplished over the last four years. We and our partners at Hicks Equity Partners have worked closely with management to refocus the business on high value products. As a result, Latrobe has expanded capacity, created new opportunities within the oil, gas, and power generation industries, and fostered an entrepreneurial culture that has fueled the success of the business. By joining forces with Carpenter, Latrobe will be positioned to drive future growth and capitalize on the many new value creation opportunities it will enjoy as part of this engineered metals leader.”
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 was represented by J.P. Morgan as financial advisor and Pepper Hamilton LLP as legal counsel. Latrobe, Hicks Equity Partners and Watermill were represented by Credit Suisse as financial advisor and Jones Day as legal counsel.
