2006 A Banner Acquisition Year: 2007 Off to Strong Start

Richard Hagen

In his 10th annual Top Ten Fastener Acquisitions Richard Hagan found 2006 to be “another banner year for mergers & acquisitions in the worldwide fastener industry and it appears very likely this trend will continue throughout 2007.”
Hagan, president of NY-based Pinnacle Capital Corporation, counted 29 fastener deals worldwide during 2006 the highest total in recent years.
“Because there are so many small private companies which change ownership “under the radar”, it is nearly impossible to log every transaction involving a fastener manufacturer or distributor,” Hagan noted.
Aerospace fastener deals dominate our Top Ten list for 2006, totaling half the acquisition value. The Total Transaction Value (cash or securities paid plus debt assumed) of the five aerospace fastener deals was approximately $3.1 billion. Two of the deals added up to more than half of the total: the sale of Aviall Inc. to the Boeing Company for $2.24 billion; and the sale of Wesco Aircraft Hardware Corp. to the Carlyle Group for at least $700 million (estimated).
Anixter International Inc. and Precision Castparts Corp. continued to aggressively acquire fastener companies in 2006. With the purchase of MFU Holdings SpA of Italy in October 2006, Anixter has now acquired a significant fastener distributor in each of the past five years (starting with Pentacon Inc. in 2002) and has assembled a fastener distribution division with annual net sales approaching $1 billion. With the purchase of the Shur-Lok Group in January 2006, Precision Castparts has completed three significant fastener manufacturing acquisitions over the past four years (starting with SPS Technologies Inc. in 2003) and fastener manufacturing sales now total approximately $1 billion.
Strong Start to 2007
M&A activity continues at a strong pace thus far in 2007, Hagan finds. In February Precision Castparts expanded its aerospace fastener manufacturing with the purchase of Cherry Aerospace LLC for $300 million in cash.
Other major fastener acquisitions, either completed or announced, this year include the purchase of FastenTech Inc. by Doncasters Group Limited for $492 million; the acquisition of Koninklijke Nedschroef Holding NV by Gilde Buy Out Partners for 279 million; (US$376 million); the purchase of McKechnie Aerospace by JLL Partners for $855 million; and the merger of Lone Star Fasteners LP and PRD Holdings Limited in a transaction valued at $150 million.
Hagan”s Top 10 Fastener Acquisitions of 2006
(Arranged in chronological order)
1. Precision Castparts Corp. purchased aerospace manufacturer Shur-Lok Group for $113 million in cash. The group includes Shur-Lok Corp. of Irvine, CA and Shur-Lok International SA of Belgium. Founded in 1951, Shur-Lok Group employs a total of 270 people at its two plants. Products include barrel nuts, bearing lock nuts, honeycomb sandwich inserts, ring-locked inserts & studs and fluid fittings.
Shur-Lok Group became part of Precision Castparts” Fastener Products segment, which includes SPS Technologies and Air Industries.

2. Satair A/S (Copenhagen Stock Exchange: SAT) purchased TPA Pte. Ltd. for $38.5 million, comprised of $23.9 million cash, $8 million of Satair common stock and $6.6 million of assumed debt. Based in Singapore, TPA distributes aerospace fasteners and hardware in the Asia/Pacific region, primarily supplying commercial airlines and aircraft maintenance providers. The company also provides aircraft component repair services and, through a joint venture, provides repair services for aircraft cargo handling systems. TPA has facilities in Singapore, Beijing, Seoul, Tokyo and Dubai and employs 52 people worldwide.
TPA”s 2005 sales totaled $35 million and EBITDA was $2.8 million. The TPA management team remains in place and the CEO became a Satair director. TPA was purchased from TPA Strategic Holdings Ltd. (Singapore Stock Exchange: TPAS).

3. In August Platinum Equity LLC completed the purchase of Textron Fastening Systems from Textron Inc. for $613 million in cash. Troy, MI-based TFS operates 38 manufacturing facilities and has 9,000 employees in 17 countries. TFS reported 2005 net sales of $1.8 billion. TFS brands include: Avdel, B�sner, BSK, Camcar, Cherry, Elco, Flexalloy, Intevia, S�kosim and Torx.
Textron began exploring the sale of TFS during the 3rd quarter of 2005 and recorded total impairment charges of $507 million for this divestiture (the amount that Textron”s book value exceeded the fair market value of the division). Beverly Hills, CA-based Platinum Equity is a $700 million private equity fund that owns 21 portfolio companies. Shortly after the acquisition TFS was renamed Acument Global Technologies Inc.

4. In September B/E Aerospace Inc. purchased New York Fasteners Corp. for $66.9 million in cash. Paramus, NJ-based NYF, a privately owned company founded in 1956, distributes aerospace fasteners and assembly hardware to OEMs and the military. In the fiscal year ended June 30, 2006, NYF generated net sales of approximately $56 million, with the largest customers being United Technologies Corp. subsidiaries Sikorsky Aircraft and Hamilton Sundstrand.
B/E has merged NYF with its aerospace fastener distribution business, M&M Aerospace Hardware Inc. Senior NYF managers left the company.

5. In September Boeing Company completed the purchase of Aviall Inc. for $2.24 billion. The purchase price was comprised of $1.79 billion cash paid for the whole of Avail”s fully diluted common stock, plus the assumption of $448 million of debt.
Dallas-based Aviall was an independent supplier of aviation hardware and related aftermarket services to the aerospace industry. Aviall has approximately 1,000 employees and operates 39 service centers in North America, Europe, Asia, Australia and New Zealand. Aviall reported 2005 net sales of $1.295 billion and EBITDA of $129.3 million.
Following the transaction closing, Aviall became a wholly owned Boeing subsidiary reporting to Boeing Commercial Aviation Services.

6. In September The Carlyle Group completed the purchase of Wesco Aircraft Hardware Corp. for an undisclosed purchase price. Wesco is a value-added distributor of aerospace fasteners and related assembly hardware, supplying more than 5,000 customers including the U.S. Department of Defense and major aerospace OEMs worldwide.
Founded in 1953, privately-owned Wesco is headquartered in Valencia, CA, and operates five warehouses in France (2), England, Germany and Israel. Wesco generates annual net sales in excess of $300 million and employs more than 600 people worldwide.
The purchase price paid by The Carlyle Group, one of the world”s most prestigious private equity firms, is thus far a well-kept secret. Officially, Carlyle announced only that it acquired a “majority equity position” in Wesco and that CEO Randy Snyder retains “a significant ownership position” and continue to manage the company.
It has also been disclosed that a $675 million senior secured credit facility was put into place to fund the Wesco acquisition. Our “best guess” is that the total purchase price will be well in excess of $700 million by the time Snyder finally cashes out.

7. In October Park-Ohio Holdings Corp. purchased NABS Inc. for $21.2 million in cash. NABS, a privately-owned company headquartered in New York, NY, is a value-added distributor of fasteners and assembly hardware, supplying high technology companies in the computer, electronics and consumer products industries. NABS has five U.S. locations and 14 operations in Mexico, China, India, Taiwan, Singapore, Hungary, Ireland and Scotland. Major customers include Dell, Gateway, Hewlett-Packard, IBM, Intel, Lexmark and Motorola.
NABS generates annual net sales of approximately $45 million. NABS now is part of the Integrated Logistics Solutions (ILS) segment of Park-Ohio. With NABS, annual sales for ILS now exceed $600 million.
8. In October Anixter International Inc. purchased MFU Holdings SpA for $66.9 million, comprised of $61.1 million cash and $5.8 million of assumed debt. MFU, based in Brescia, Italy, distributes fasteners and related assembly hardware to OEMs in Italy (80% of sales), Spain, Turkey, Germany and other European countries. MFU employs approximately 100 people and had sales of $66 million in 2006. MFU expands the European presence of Anixter”s OEM Supply segment, which is predominantly UK-based.
MFU is Anixter”s fourth major add-on acquisition since it entered the fastener distribution business in 2002 with the purchase of Pentacon Inc. Anixter acquired Walters Hexagon Group Ltd. in 2003, Distribution Dynamics Inc. in 2004 and Infast plc in 2005.

9. In November Brockway Moran & Partners Inc. purchased MW Industries Inc. for an undisclosed price. MW Industries, a privately owned company headquartered in Logansport, IN, is a manufacturer and catalog marketer of springs and specialty fasteners. MW Industries employs 900 people at 12 manufacturing facilities in nine states. The company also has a joint venture and sales office in China. MW Industries” product range includes coil springs, externally threaded fasteners, washers, spacers & standoffs, wire forms and rings. The company”s major operating units include Rolex Spring, Automatic Spring, Atlantic Spring, Rumco Fastener and Accurate Screw Machine.
Boca Raton, FL-based Brockway Moran is a private equity firm with more than $1.3 billion of capital under management. The Chinese private equity firm of CITIC Capital Partners (CCP) co-invested with Brockway Moran and MW Industries management. CCP invests in middle market manufacturing companies, which can benefit from access to China.

10. In December Trifast plc completed the purchase of 25% of the outstanding shares of Techfast Holdings Bhd for �2.78 million (US$5.55 million). Techfast, based in Kuala Lumpur, Malaysia, manufactures self-clinching sheet metal fasteners from two factories in Malaysia and one in Suzhou, China. Techfast products compete with those of Penn Engineering, Captive Fastener and Southco in the U.S. and PSM and Trifast in the UK. Approximately 30-40% of Techfast”s production ends up in LCD televisions.
In 2006, Techfast is expected to generate net sales of �4.2 million (US$8.4 million). Techfast shares are traded on the Malaysian Stock Exchange, but Trifast purchased its shares from senior management and a substantial shareholder. Following the transaction, Techfast senior management still owned 24% of the company”s outstanding shares and will continue in their current roles.

For details on the above transactions or information on the fastener investment banking services provided by Pinnacle Capital Corporation, contact Richard Hagan, 130 Water St., Suite 12G, New York, NY 10005. Tel: 212 267-8200 Email: rphagan@pinnaclecapitalcorp.com \ �2007 FastenerNews.com