FORT WORTH, Texas, March 7, 2022 /PRNewswire/ -- AZZ Inc.
("AZZ" or the "Company") (NYSE: AZZ), a global provider of
galvanizing and metal coating solutions, welding solutions,
specialty electrical equipment and highly engineered services for
maintaining and building critical infrastructure, and Sequa
Corporation ("Sequa"), a portfolio company of global investment
firm Carlyle (NASDAQ: CG), jointly announced today that
they have entered into a definitive agreement whereby AZZ will
acquire Sequa's Precoat Metals business division ("Precoat") for a
purchase price of approximately $1.28
billion. When adjusted for the net present value of
approximately $150 million of
expected net tax benefits, the net purchase price is approximately
$1.13 billion, which represents
approximately 8.2x Precoat's adjusted EBITDA for the twelve months
ended December 31, 2021.
Headquartered in St. Louis,
Missouri, Precoat is the leading independent provider of
metal coil coating solutions in North
America. Precoat engages in the advanced application
of protective and decorative coatings and related value-added
services for steel and aluminum coil primarily serving the
construction; appliance; heating, ventilation and air conditioning
(HVAC); container; transportation and other end markets.
Precoat has approximately 1,100 employees and operates a network of
13 strategically located manufacturing facilities with 15 coating
lines and 17 value-added processing lines. For the twelve
months ended December 31, 2021,
Precoat generated revenue of approximately $700 million and adjusted EBITDA of approximately
$137 million.
Tom Ferguson, Chief Executive
Officer of AZZ, commented, "We are pleased to acquire
North America's largest
independent provider of metal coil coatings and related
services. Through this acquisition, AZZ significantly
broadens our metal coatings offering, creating unrivaled scale and
breadth of solutions in both the prepainted and post-fabrication
coatings markets. We believe the coil coating market will
provide sustainable future growth for AZZ, and we intend to provide
Precoat with the financial resources to expand and further invest
in commercial and operational excellence. This acquisition is
consistent with our previously communicated strategy prioritizing
North American coatings targets with strong strategic fit that are
accretive within the first year of operation, and it is a testament
to our commitment to drive profitable growth. This
acquisition represents a continued transition of AZZ from a diverse
holding company to a focused provider of coating and galvanizing
services for critical applications. We welcome Precoat's
talented employees and management team to AZZ and look forward to a
seamless integration with uninterrupted industry-leading service to
their customers."
Kurt Russell, President of
Precoat, commented, "This is an exciting milestone for Precoat
Metals. Through our 60-year history, Precoat has been part of
several great organizations, and I believe AZZ is an excellent
cultural fit for our company. This acquisition provides a
great opportunity for Precoat to continue our core growth
strategies in support of our customers, while bringing a level of
diversification to AZZ's existing strong metal coating and
finishing capabilities."
"I would like to thank the Precoat team for all of their
contributions to Sequa," said Tom
Mepham, Chief Executive Officer of Sequa. "Precoat has
been an important and valuable part of the Sequa story through its
history, and I am excited for its next chapter with AZZ and for the
future of Chromalloy as a focused, standalone high-growth aerospace
and aeroderivative aftermarket business."
The acquisition is anticipated to be immediately and
substantially accretive to AZZ's adjusted earnings per share.
Not including Precoat, AZZ upgrades its fiscal year 2022
revenue guidance to $890 million to
$910 million and now expects to
generate fiscal year 2022 earnings per share of $3.15 to $3.25,
exceeding the Company's prior guidance of $3.00 to $3.20.
AZZ expects to fund the transaction with a combination of cash
on hand, newly issued debt financing and the issuance of equity or
equity-linked securities. Following the transaction,
deleveraging will be a near-term capital allocation priority of the
Company. AZZ expects significant post-closing deleveraging
driven by the strong free cash flow generation of the combined
business and remains committed to paying a dividend on its common
stock while continuing to support profitable growth initiatives.
The transaction is expected to close in the first quarter of
AZZ's fiscal year 2023 and is subject to customary closing
conditions and regulatory approvals.
Advisors
Citi acted as financial advisor to AZZ and Baker & McKenzie
LLP served as legal counsel in connection with the
transaction. Citi and Wells Fargo provided committed debt
financing for the transaction. Ernst & Young Capital
Advisors, LLC served as independent capital advisor to the
Company.
Evercore and Barclays acted as financial advisors to Sequa
Corporation and Latham & Watkins LLP served as legal counsel in
connection with the transaction.
Conference Call
AZZ Inc. will conduct a conference call to discuss the
transaction Tuesday, March 8, 2022,
at 11:00 A.M. ET. Interested parties
can access the conference call by dialing (844) 855-9499 or (412)
317-5497 (international). A webcast of the call will be
available on the Company's Investor Relations page at
http://www.azz.com/investor-relations.
A replay of the call will be available at (877) 344-7529 or
(412) 317-0088 (international), replay access code: 1365031,
through March 15, 2022, or by
visiting http://www.azz.com/investor-relations.
There will be a slide presentation accompanying today's
event. The Company's slide presentation for the call will be
available on the Investor Relations page at
http://www.azz.com/investor-relations.
About AZZ Inc.
AZZ Inc. is a global provider of galvanizing and a variety of
metal coating solutions, welding solutions, specialty electrical
equipment and highly engineered services to a broad range of
markets, including, but not limited to, the power generation,
transmission, distribution, refining and industrial markets.
AZZ's Metal Coatings segment is a leading provider of metal
finishing solutions for corrosion protection, including hot-dip
galvanizing, spin galvanizing, powder coating, anodizing and
plating, to the North American steel fabrication industry.
AZZ's Infrastructure Solutions segment is dedicated to delivering
safe and reliable transmission of power from generation sources to
end customers, and automated weld overlay solutions for corrosion
and erosion mitigation to critical infrastructure in the energy and
waste management markets worldwide.
About Precoat Metals
Founded in 1961 and headquartered in St. Louis, Missouri, Precoat Metals is the
leading independent provider of metal coil coating solutions in
North America. Precoat engages in the advanced application of
protective and decorative coatings and related value-added services
for steel and aluminum coil primarily serving the construction;
appliance; heating, ventilation and air conditioning (HVAC);
container; transportation and other end markets. Precoat has
approximately 1,100 employees and operates a network of 13
strategically located manufacturing facilities with 15 coating
lines and 17 value-added processing lines.
About Sequa Corporation
Sequa Corporation is a diversified industrial company with
operations in the aerospace, energy and metal coatings industries
through its Chromalloy and Precoat Metals business units.
Chromalloy provides the airline industry with a broad range
of aftermarket services and ranks as the leading independent
supplier of advanced repairs for jet engine parts. Chromalloy
operates around the world and around the clock, providing airlines
with timely, cost-effective, and proven repairs for turbine
airfoils and other critical engine parts – repairs that extend the
life of the parts and drive down airline maintenance costs.
Chromalloy also serves the industrial and marine gas turbine
market, as well as the military market. Precoat Metals, the
largest independent metal coil coater in North America, provides speedy, dependable
service and the highest standard of quality to a broad range of
industrial customers. A leader in the application of
decorative and protective coatings to continuous coiled steel for
use in commercial and residential construction projects, Precoat
also serves an expanding roster of other industrial end
users. For additional information, visit www.sequa.com.
Safe Harbor Statement
Certain statements herein about our expectations of future
events or results constitute forward-looking statements for
purposes of the safe harbor provisions of The Private Securities
Litigation Reform Act of 1995. You can identify forward-looking
statements by terminology such as "may," "should," "expects,"
"plans," "anticipates," "believes," "estimates," "predicts,"
"potential," "continue," or the negative of these terms or other
comparable terminology. Such forward-looking statements are based
on currently available competitive, financial and economic data and
management's views and assumptions regarding future events. Such
forward-looking statements are inherently uncertain, and investors
must recognize that actual results may differ from those expressed
or implied in the forward-looking statements. Certain factors could
affect the outcome of the matters described herein. This press
release may contain forward-looking statements that involve risks
and uncertainties including, but not limited to, changes in
customer demand for our products and services, including demand by
the power generation markets, electrical transmission and
distribution markets, the industrial markets, and the metal
coatings markets. In addition, within each of the markets we
serve, our customers and our operations could potentially continue
to be adversely impacted by the ongoing COVID-19 pandemic,
including governmental issued mandates regarding the same. We could
also experience additional increases in labor costs, components and
raw materials, including zinc and natural gas, which are used in
our hot dip galvanizing process; supply-chain vendor delays;
customer requested delays of our products or services; delays in
additional acquisition or disposition opportunities; currency
exchange rates; availability of experienced management and
employees to implement AZZ's growth strategy; a downturn in market
conditions in any industry relating to the products we inventory or
sell or the services that we provide; economic volatility or
changes in the political stability in the
United States and other foreign markets in which we operate;
acts of war or terrorism inside the
United States or abroad; and other changes in economic and
financial conditions. AZZ has provided additional information
regarding risks associated with the business in AZZ's Annual Report
on Form 10-K for the fiscal year ended February 28, 2021 and other filings with the
Securities and Exchange Commission ("SEC"), available for viewing
on AZZ's website at www.azz.com and on the SEC's website at
www.sec.gov. You are urged to consider these factors
carefully in evaluating the forward-looking statements herein and
are cautioned not to place undue reliance on such forward-looking
statements, which are qualified in their entirety by this
cautionary statement. These statements are based on information as
of the date hereof and AZZ assumes no obligation to update any
forward-looking statements, whether as a result of new information,
future events, or otherwise.
Non-GAAP Financial Measures
Some of the financial information and data contained in this
press release, such as adjusted EBITDA and adjusted earnings per
share, have not been prepared in accordance with Generally Accepted
Accounting Principles in the United
States ("GAAP"). The Company's management believes that the
presentation of these non-GAAP financial measures provides
investors with a greater transparency comparison of operating
results across a broad spectrum of companies, which provides a more
complete understanding of the Company's financial performance,
competitive position and prospects for the future. Management also
believes that investors regularly rely on non-GAAP financial
measures, such as adjusted EBITDA and adjusted earnings per share,
to assess operating performance and that such measures may
highlight trends in the Company's business that may not otherwise
be apparent when relying on financial measures calculated in
accordance with GAAP.
While the Company believes these non-GAAP measures are useful in
evaluating the Company's performance, this information should be
considered as supplemental in nature and not as a substitute for or
superior to the related financial information prepared in
accordance with GAAP. Additionally, these non-GAAP financial
measures may differ from similar measures presented by other
companies.
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SOURCE AZZ Inc.