Acquisition to provide MEC strategic
capabilities expansion within lightweight materials
Acquisition expected to be immediately
accretive, excluding transaction costs, to MEC’s EPS, Adjusted
EBITDA and Free Cash Flow at closing
MEC to host MSA acquisition conference call and
webcast at 8:00 a.m. Eastern Time on Tuesday, June 20, 2023
Mayville Engineering Company, Inc. (NYSE: MEC) (the “Company” or
“MEC”), a leading value-added provider of design, prototyping and
manufacturing solutions serving diverse end-markets, today
announced a definitive agreement to acquire privately held
Mid-States Aluminum Corp. (“MSA”) for a total consideration of
approximately $96 million, subject to customary adjustments. The
proposed acquisition is expected to close during the third quarter
2023, subject to the satisfaction of customary closing
conditions.
Wisconsin-based MSA is an industry-leading, vertically
integrated manufacturer of custom aluminum extrusions and
fabrications. MSA offers value-added services that include design,
engineering, extrusions, fabrication, anodizing and finishing,
assembly, and packaging. For nearly 60 years, MSA has served major
OEMs in the Building and Construction, Recreational, Medical,
Agriculture, Transportation and other diverse end-markets. MSA
operates two state-of-the-art facilities, both in Fond du Lac,
Wisconsin, that include approximately 325,000 square-feet of
manufacturing space.
“MSA is an established provider of aluminum extrusions, whose
history of growth and innovation, attractive margin profile, deep
customer relationships and diverse end-markets are highly
complementary to our existing business,” said Jag Reddy, President
and Chief Executive Officer. “Upon closing of the acquisition, MSA
will be immediately accretive, excluding transaction costs, to
MEC’s earnings per share, Adjusted EBITDA margin and free cash
flow.”
“Our acquisition of MSA will accelerate the expansion of MEC’s
capabilities into lightweight materials fabrication, a designated
strategic priority highlighted within our MBX value creation
framework,” continued Reddy. “MSA’s state-of-the-art design,
engineering and manufacturing capabilities are highly complementary
to our existing operations, providing a platform for higher-margin
profitable growth within growing adjacent markets.”
“Customer demand for fabrications expertise within aluminum and
other lightweight materials continues to increase,” stated Reddy.
“The addition of MSA will position us to grow our share-of-wallet
with existing accounts, while building leading market positions
within nascent, high-potential industries that require the full
lifecycle of solutions that we offer. During the next three years,
we anticipate significant synergies to result from this
transaction, consistent with our long-term focus on margin
expansion and profitable growth,” concluded Reddy.
“We are excited to welcome MSA’s 250 employees to the MEC
family,” concluded Reddy. “Our shared commitment to product
innovation, performance excellence, customer-centric relationships
and long-term value creation will help us further deliver on our
MBX initiatives, while continuing to build a market-leading brand
of scale.”
TRANSACTION OVERVIEW
MSA brings to MEC an established track record of financial and
operational execution. For the full-year 2022, MSA recorded total
revenue and Adjusted EBITDA of approximately $86 million and $16
million, respectively, resulting in an Adjusted EBITDA margin of
more than 18%. Upon closing, the transaction will be immediately
accretive, excluding transaction costs, to MEC’s earnings per
share, Adjusted EBITDA and free cash flow.
MEC intends to fund the transaction with an amendment to its
existing credit agreement that increases the revolving credit
facility size to $250 million. At closing, MEC anticipates its
pro-forma ratio of net debt to Adjusted EBITDA will be
approximately 2.5x - 2.8x. Given the expected cash generation of
the combined company, MEC intends to reduce its net leverage within
the first 18 months after the closing of the transaction to 1.5x -
2.0x.
Based on current expectations and market conditions, the Company
expects that the MSA acquisition will contribute between $30 - $35
million of net sales and between $4 - $6 million in Adjusted EBITDA
for the fiscal year 2023.
STRATEGIC RATIONALE
- MSA gives MEC light-weight materials fabrication
capabilities. The addition of MSA’s state-of-the-art aluminum
extrusions and fabrication capabilities will position MEC as a
leading domestic manufacturing partner for large OEMs. The addition
of these capabilities’ further positions MEC to capture demand for
its services being created by multi-year onshoring and energy
transition trends.
- MSA provides new cross-selling opportunities to grow
share-of-wallet with existing customers. Many of MEC’s large
and longstanding customers in the Commercial Vehicle, Power Sports,
Agriculture and Construction & Access markets have indicated an
immediate need for aluminum fabrication capabilities. Through the
MSA acquisition, MEC will be able to actively meet this existing
customer demand, creating attractive revenue synergies.
- MSA expands MEC’s service capabilities within growing
adjacent markets. MEC remains committed to concentrating its
market expansion activities within emerging technologies, such as
Battery Electric Vehicles, where demand for light-weight material
product design, engineering and fabrication solutions continue to
accelerate. The addition of MSA’s aluminum fabrication capabilities
will position MEC to become an early mover of scale within these
vertical markets.
- MSA brings a superior margin profile to MEC. The
acquisition of MSA is expected to be immediately accretive,
excluding transaction costs, to MEC at transaction closing. During
the three-years ended 2022, MSA has generated an average Adjusted
EBITDA margin of 15.6%, or 530 basis points above MEC’s Adjusted
EBITDA margin during the same period.
- MSA provides a complementary domestic manufacturing
footprint. Given MEC’s existing domestic manufacturing
footprint, the location of MSA’s facilities will allow for an
easier integration into MEC’s existing network and process flow.
The Company anticipates no material disruption to operations at
either MEC or MSA during the integration period, which is expected
to conclude by the end of 2023.
MSA ACQUISITION CONFERENCE CALL
A conference call will be held today at 8:00 a.m. Eastern Time
to discuss MEC’s acquisition of MSA and conduct a
question-and-answer session.
A webcast of the conference call and accompanying presentation
materials will be available in the Investor Relations section of
the MEC corporate website at https://ir.mecinc.com. To listen to
the live webcast, go to the site at least 15 minutes prior to the
scheduled start time to register, download and install any
necessary audio software.
For telephone access to the conference, call (833) 470-1428
within the United States, or call (833) 950-0062 within Canada and
please use the Access Code: 287374.
ABOUT MAYVILLE ENGINEERING COMPANY
Founded in 1945, Mayville Engineering Company is a leading
U.S.-based, vertically-integrated, value-added manufacturing
partner providing a full suite of manufacturing solutions from
concept to production, including design, prototyping and tooling,
fabrication, coating, assembly and aftermarket components. Our
customers operate in diverse end markets, including heavy- and
medium-duty commercial vehicles, construction & access
equipment, powersports, agriculture, military and other end
markets. Along with process engineering and development services,
MEC maintains an extensive manufacturing infrastructure with 20
facilities across seven states. These facilities make it possible
to offer conventional and CNC (computer numerical control)
stamping, shearing, fiber laser cutting, forming, drilling,
tapping, grinding, tube bending, machining, welding, assembly, and
logistic services. MEC also possesses a broad range of finishing
capabilities including shot blasting, e-coating, powder coating,
wet spray and military grade chemical agent resistant coating
(CARC) painting.
ABOUT MID-STATES ALUMINUM CORP.
Founded in 1964, Mid-States Aluminum Corp. is an
industry-leading aluminum extrusion manufacturer with value-added
capabilities including design and engineering services, extrusions,
fabrication, anodizing and finishing, assembly and packaging. MSA
serves the Building and Construction, Recreational, Medical,
Agriculture, Transportation, and other diverse end markets.
FORWARD-LOOKING STATEMENTS
This press release includes forward-looking statements that
reflect plans, estimates and beliefs. Such statements involve risk
and uncertainties. Actual results may differ materially from those
contemplated by these forward-looking statements as a result of
various factors. Important factors that could cause actual results
or events to differ materially from those expressed in
forward-looking statements include, but are not limited to:
macroeconomic conditions, including inflation, rising interest
rates and recessionary concerns, as well as ongoing supply chain
challenges, labor availability and cost pressures, and the COVID-19
pandemic, have had, and may continue to have, a negative impact on
our business, financial condition, cash flows and results of
operations (including future uncertain impacts); risks relating to
developments in the industries in which our customers operate;
risks related to scheduling production accurately and maximizing
efficiency; our ability to realize net sales represented by our
awarded business; failure to compete successfully in our markets;
our ability to maintain our manufacturing, engineering and
technological expertise; the loss of any of our large customers or
the loss of their respective market shares; risks related to
entering new markets; our ability to recruit and retain our key
executive officers, managers and trade-skilled personnel;
volatility in the prices or availability of raw materials critical
to our business; manufacturing risks, including delays and
technical problems, issues with third-party suppliers,
environmental risks and applicable statutory and regulatory
requirements; our ability to successfully identify or integrate
acquisitions; our ability to develop new and innovative processes
and gain customer acceptance of such processes; risks related to
our information technology systems and infrastructure; geopolitical
and economic developments, including foreign trade relations and
associated tariffs; results of legal disputes, including product
liability, intellectual property infringement and other claims;
risks associated with our capital-intensive industry; risks related
to our treatment as an S Corporation prior to the consummation of
our initial public offering; risks related to our employee stock
ownership plan’s treatment as a tax-qualified retirement plan; and
other factors described in “Risk Factors” in Part I, Item 1A of our
Annual Report on Form 10-K for the year ended December 31, 2022, as
such may be amended or supplemented in our subsequently filed
Quarterly Reports on Form 10-Q. This discussion should be read in
conjunction with our audited consolidated financial statements
included in the Company’s previously filed Annual Report on Form
10-K for the year ended December 31, 2022. We undertake no
obligation to update or revise any forward-looking statements after
the date on which any such statement is made, whether as a result
of new information, future events or otherwise, except as required
by federal securities laws.
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version on businesswire.com: https://www.businesswire.com/news/home/20230620412785/en/
INVESTOR / MEDIA CONTACT Stefan Neely or Noel Ryan (615)
844-6248 MEC@val-adv.com
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