Russian Steel Maker To Acquire John Maneely
Novolipetsk
Steel (NLMK), the leading Russian steel producer, has signed a definitive
agreement to acquire U.S. steel pipe and tube manufacturer John ManeelyCo.
(JMC) from a shareholder group including global private equity firm The Carlyle
Group and the Zekelman family for $3.53 billion, acquiring the company on a
debt-free, cash-free basis. The transaction is subject to customary regulatory
approvals and is expected to close in the fourth quarter of
2008.
JMC is the largest independent tubular manufacturer in North America, with holdings that include the Wheatland and Atlas Tube divisions, and Seminole Tubular Products. During Carlyle’s ownership, sales increased by $800 million, a 36% percent rise, from $2.2 billion in fiscal 2006 to an estimated $3 billion in fiscal 2008.
Formed through the combination of John Maneely Co. and Atlas Tube in December 2006 and headquartered in Beachwood, OH, JMC operates 11 plants in five U.S. states and one Canadian province with a total production capacity of more than 3 million tons of steel pipe and tube per annum.
NLMK, through its joint venture with Duferco Group, has two manufacturing facilities in the U.S.: Duferco Farrell Corp. and Sharon Coating LLC. Duferco Farrell is currently the key supplier of hot rolled coils (HRC) to JMC and in particular the largest supplier of HRC to JMC’s Wheatland division, to which it is closely located. NLMK is therefore in an excellent position to extract synergies (estimated to be around US$35 million per annum) from the vertical integration of its steel assets in North America with JMC’s low cost processing capabilities.
Vladimir Lisin, chairman of NLMK, said, “We are delighted to have secured an entry into the highly attractive U.S. pipe and tube market and we are confident that the incorporation of JMC’s quality assets into the NLMK group will prove to be a highly attractive investment for NLMK’s shareholders as well as a beneficial development for JMC’s customers and employees.”
Barry Zekelman, chief executive officer of JMC, said, “Our hard work these past few years has demonstrated that Atlas and Wheatland are formidable players in their served markets. We are proud to become part of the NLMK steel family and believe the future is bright for the company and its dedicated employees.”
Tom Conway, international vice president (administration) USW, said, “The United Steelworkers has had long-standing productive relationships with both companies. We look forward to working with the new owners.”
Daniel A. Pryor, managing director on the Carlyle industrial team, said, “In the face of intense global competition, JMC’s remarkable management team and work force have built the premier global steel pipe and tube manufacturer. They have created economies of scale through two strategic acquisitions, improved operations with lean manufacturing and Six Sigma techniques, and grown sales through an intense focus on customer service. At many plants, the workforce has shared the benefits of this transformation via gain-sharing programs. This is a great example of how private equity can help create value.”
The transaction will be financed from available bank commitments, including the recently established US$1.6 billion Pre Export Finance (PXF) facility and a $2 billion bridge commitment provided by Merrill Lynch, Deutsche Bank and Societe Generale.
Merrill Lynch is the exclusive financial advisor and Debevoise & Plimpton is the legal counsel to NLMK. JP Morgan, Goldman Sachs and GMP Securities provided financial advice to JMC and Latham & Watkins is the legal counsel.
Headquartered in Lipetsk, Russia, NLMK has annual revenues of about $7.7 billion and 70,000 employees in production facilities across Russia, Europe and the United States. NLMK’s ordinary shares are traded on the RTS and MICEX Stock Exchanges in Russia, and its global depository shares trade on the London Stock Exchange.
JMC is the largest independent tubular manufacturer in North America, with holdings that include the Wheatland and Atlas Tube divisions, and Seminole Tubular Products. During Carlyle’s ownership, sales increased by $800 million, a 36% percent rise, from $2.2 billion in fiscal 2006 to an estimated $3 billion in fiscal 2008.
Formed through the combination of John Maneely Co. and Atlas Tube in December 2006 and headquartered in Beachwood, OH, JMC operates 11 plants in five U.S. states and one Canadian province with a total production capacity of more than 3 million tons of steel pipe and tube per annum.
NLMK, through its joint venture with Duferco Group, has two manufacturing facilities in the U.S.: Duferco Farrell Corp. and Sharon Coating LLC. Duferco Farrell is currently the key supplier of hot rolled coils (HRC) to JMC and in particular the largest supplier of HRC to JMC’s Wheatland division, to which it is closely located. NLMK is therefore in an excellent position to extract synergies (estimated to be around US$35 million per annum) from the vertical integration of its steel assets in North America with JMC’s low cost processing capabilities.
Vladimir Lisin, chairman of NLMK, said, “We are delighted to have secured an entry into the highly attractive U.S. pipe and tube market and we are confident that the incorporation of JMC’s quality assets into the NLMK group will prove to be a highly attractive investment for NLMK’s shareholders as well as a beneficial development for JMC’s customers and employees.”
Barry Zekelman, chief executive officer of JMC, said, “Our hard work these past few years has demonstrated that Atlas and Wheatland are formidable players in their served markets. We are proud to become part of the NLMK steel family and believe the future is bright for the company and its dedicated employees.”
Tom Conway, international vice president (administration) USW, said, “The United Steelworkers has had long-standing productive relationships with both companies. We look forward to working with the new owners.”
Daniel A. Pryor, managing director on the Carlyle industrial team, said, “In the face of intense global competition, JMC’s remarkable management team and work force have built the premier global steel pipe and tube manufacturer. They have created economies of scale through two strategic acquisitions, improved operations with lean manufacturing and Six Sigma techniques, and grown sales through an intense focus on customer service. At many plants, the workforce has shared the benefits of this transformation via gain-sharing programs. This is a great example of how private equity can help create value.”
The transaction will be financed from available bank commitments, including the recently established US$1.6 billion Pre Export Finance (PXF) facility and a $2 billion bridge commitment provided by Merrill Lynch, Deutsche Bank and Societe Generale.
Merrill Lynch is the exclusive financial advisor and Debevoise & Plimpton is the legal counsel to NLMK. JP Morgan, Goldman Sachs and GMP Securities provided financial advice to JMC and Latham & Watkins is the legal counsel.
Headquartered in Lipetsk, Russia, NLMK has annual revenues of about $7.7 billion and 70,000 employees in production facilities across Russia, Europe and the United States. NLMK’s ordinary shares are traded on the RTS and MICEX Stock Exchanges in Russia, and its global depository shares trade on the London Stock Exchange.
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