Global Fastener News

STOCK ISSUE
Fastener Company Acquisitions Remained Strong in 2008
Pace of deals comparable with 2007

The sales of fasteners may be down with the economy, but the number of fastener companies being sold continued at a strong pace in 2008, fastener firm acquisition specialist Richard Hagan reported with his 12th annual Top Ten Deals of the Year.

“Most economists agree that the current global recession began during the first half of 2008 and nearly all the fastener companies we follow recorded lower net sales in 2008 compared with 2007,” Hagan noted.

Despite the economy, Hagen counted 24 fastener company transactions completed worldwide during 2008. “This total compares quite favorably to the 27 fastener transactions completed during 2007 and the average of 18 to 22 deals per year over the past eight years,” the president of NY-based Pinnacle Capital Corporation found.

In addition, 16 of the transactions were in excess of $20 million, Hagan pointed out. Five deals involved private equity companies.

“While 2008 was a surprisingly strong year for deal making in the global fastener industry, we expect that the number of transactions closed during 2009 will be the lowest since we began compiling this list 12 years ago,” Hagan predicted to FastenerNews.com. During the first quarter of 2009 only three deals closed, he noted.

“There are still fastener company executives and owners who are currently interested in exploring or pursuing deal opportunities, however, an attitude of ‘we want to hunker down and wait to see how the current economic crisis plays out’ seems quite pervasive,” Hagan finds.

2008 – Top Ten Deals of the Year
( arranged in chronological order )

By Richard P. Hagan, Pinnacle Capital Corporation

1) In February, Industri Kapital purchased Group Etanco from its founding family. Groupe Etanco, founded in 1952 and based outside of Paris, manufactures and distributes fasteners and building products for the European construction industry. The privately-owned company has six European locations, employs 600 people and generates annual net sales of approximately 130 million (US$176m). Industri Kapital – subsequently renamed IK Investment Partners – is a Swedish private equity firm with 5.7 billion (US$7.7b) under management and branch offices in London, Paris, Hamburg and Oslo. Estimated price: 250 million (US$339.1m)

2) In March, Alcoa Inc. purchased Republic Fastener Manufacturing Corp. and Van Petty Manufacturing from The Wood Family Trust. The two companies, both located in Newbury Park, CA, employ a total of 240 people and had combined 2007 net sales of $51 million. Republic manufactures aerospace self-locking nuts and plate nuts. Van Petty is a niche manufacturer of specialty bolts for aerospace and high-end industrial applications. Jake Wood founded Republic in 1968 and later purchased Van Petty, which has been operating since 1943. Wood died in 2007. Republic and Van Petty are now part of Torrance, CA-based Alcoa Fastening Systems. AFS employs 6,600 people at 26 locations in 9 countries. Purchase price: $276 million

3) In July, B/E Aerospace Inc. purchased the Honeywell Consumables Solutions division of Honeywell International Inc. HCS is one of the world’s largest distributors of aerospace fasteners and consumable hardware, with net sales of $553 million and EBITDA of $83 million (latest 12 months ended March 31, 2008). As part of the transaction, B/E Aerospace entered into a 30-year contract to become Honeywell’s exclusive licensee for the proprietary fasteners, seals, gaskets and electrical components associated with Honeywell’s Aerospace division. The division manufactures engines, engine controls, avionics & electronics, landing systems, power systems and environmental controls. B/E Aerospace also becomes the exclusive supplier of such consumable products – as well as standard fasteners and hardware – to support Honeywell Aerospace’s internal manufacturing requirements. The operations of HCS will be integrated into B/E Aerospace’s Fastener Distribution segment (M&M Aerospace Hardware, New York Fasteners and CMP), which recorded net sales of $386.5 million in 2007. The price paid for HCS consisted of $903.1 million of cash and six million shares of B/E Aerospace common stock valued at $158.3 million. B/E Aerospace anticipates post-acquisition synergies of at least $84 million over the three-year period following the transaction closing. Purchase price: $1.06 billion

4) In August, Anixter International Inc. purchased QSN Industries Inc. and Quality Screw de Mexico SA (“QSM”) from their founder. QSN, founded in 1977 and headquartered in the Chicago suburb of Wood Dale, IL, manufactures and distributes fasteners for the OEM marketplace. The company operates 13 distribution branches in Alabama, Arizona, Georgia, Illinois, Michigan, Ohio, South Carolina, Tennessee and Texas. Its sole manufacturing facility is located in Wood Dale. QSM was established in 1997 and operates distribution facilities in Aguascalientes, Monterrey and Nogales. The combined revenue of QSN and QSM is projected to be around $125 million in 2008. QSN and QSM will become operating units of Anixter’s OEM Supply division and production at the QSN manufacturing plant is expected to be ramped-up as business from other Anixter distribution units is directed to that operation. Anixter’s OEM Supply division recorded sales of $1.05 billion in 2007. Purchase price: $80 million

5) In August, Anixter International Inc. purchased Sofrasar SA, Camille Gergen GmbH & Co. KG and Camille Gergen Verwaltungs GmbH (collectively Sofrasar / Gergen) from the Gergen family and management. Sofrasar is based in Sarreguemines, France, and Camille Gergen is based in Dillingen, Germany. The companies are value-added fastener distributors serving the French and German OEM marketplace. The combined annual net sales of Sofrasar / Gergen are projected to exceed $110 million in 2008. The acquired companies will become operating units of Anixter’s OEM Supply division. When combined with the OEM Supply division’s other business units in Europe, Anixter projects that net sales for that division in Europe will approach $800 million in 2009 – up from $590 million in 2007. Purchase price: $59 million

6) In August, DXP Enterprises Inc. purchased PFI LLC (dba Vertex Distribution) from Watermill Ventures. Vertex Distribution, headquartered in Attleboro, MA, is an importer and stocking master distributor of stainless steel and metric fasteners with eight branch warehouses located in Atlanta, Charlotte, Chicago, Cleveland, Dallas, Houston, Los Angeles and Tampa. In the latest fiscal year, Vertex recorded net sales of $71.9 million and EBITDA of $13.3 million. The company was acquired by Boston-based private equity firm Watermill Ventures in August 2005. Houston-based DXP Enterprises distributes MRO products, equipment and services to a diverse range of industrial customers. Purchase price: $65 million

7) In September, Capvis Equity Partners AG purchased Koenig Verbindungstechnik AG from Klöckner & Co. SE. Switzerland-based KVT is a stocking distributor of branded fastener products and a manufacturer of a proprietary line of specialty sealing plugs used in hydraulic and pneumatic applications. KVT operates a single manufacturing plant in Dietikon, Switzerland, and has distribution warehouses in Germany, Austria, Poland, the Czech Republic and the U.S. KVT employs 300 people worldwide and in 2007 generated net sales of approximately 120 million (US$162.8m) and after-tax earnings of approximately 20 million (US$27.1m). Klöckner, one of Europe’s largest producer-independent steel distributors, will use the sale proceeds to expand its core steel distribution operations. Capvis is a Zurich-based private equity firm with more than 900 million (US$1.2b) under management. Purchase price: 325 million (US$440.9m)

8) In September, Kohlberg Kravis Roberts & Co. LP purchased Unisteel Technology Limited (Singapore Stock Exchange: UNST). Unisteel, founded in 1988 and headquartered in Singapore, manufactures fasteners and components for the computer, data storage systems, consumer electronics, telecommunications, audio/video appliance, industrial machinery and automotive sectors. The company produces threaded fasteners, springs & wireforms, stampings and machined metal parts, along with plastic and composite components. Unisteel also provides surface treatment services (12.5% of net sales) including polishing, passivation and plating, along with clean-room environment sub-assembly services. The company has manufacturing facilities in Singapore, Malaysia and China and in 2007 recorded net sales of $191.4 million and EBITDA of $49.1 million. KKR edged out Bain Capital and The Carlyle Group in the bidding process for Unisteel. Purchase price: $516 million

9) In September, Precision Castparts Corp. purchased Airdrome Holdings LLC, a privately-owned company comprised of Airdrome Precision Components LLC and AF Aerospace Limited. APC, founded in 1950 and located in Long Beach, CA, manufactures hydraulic and pneumatic fittings and connectors for the aerospace market. AF Aerospace, founded in 1939 and located in Rugby, England, manufactures hydraulic and pneumatic fittings and connectors for the European aerospace market. Airdrome purchased AF Aerospace from Lentern Holdings Limited in 2004. Collectively, APC and AF Aerospace employ approximately 250 people and generate annual net sales of approximately $30 million. Purchase price: $57.8 million

10) In December, Esterline Technologies Corp. (NYSE: ESL) purchased NMC Group Inc. (dba Nylon Molding Corporation). NMC, a privately-owned company, manufactures a broad range of injection-molded plastic fasteners for the aerospace, electronics, automotive and general industrial markets. The company’s product range includes clamps, grommets, stand-offs, panel fasteners, insulation fasteners and wire routing devices. Founded in 1946, NMC Group employs 100 people at its headquarters located in Pomona, CA. Esterline is a specialized manufacturer principally serving aerospace and defense customers via three business segments: Avionics & Controls, Sensors & Systems and Advanced Materials. NMC Group will be operated as a stand-alone operation within Esterline’s Advanced Materials segment. Purchase price: $90 million

Editor’s Note: For additional information on the transactions or confidential information on specialized investment banking services, contact Richard P. Hagan, president, Pinnacle Capital Corporation, 130 Water St., Suite 12G, New York, NY 10005. Tel: 212 267-8200 Email: rphagan@pinnaclecapitalcorp.com ©2009 GlobalFastenerNews.com

Related Stories:

• PERSPECTIVE: One Change Here And More to Come