FIN Stock Review
Hagan’s Top 10 Fastener Acquisitions of 2005

Richard Hagen

By Richard P. Hagan, Pinnacle Capital Corp. (Arranged in chronological order)

In March Precision Castparts Corporation acquired Air Industries Corporation for $193.3 million in cash. Garden Grove, CA-based Air Industries manufactures airframe fasteners, structural bolts, pins and screws from titanium and nickel-based alloys. Founded in 1951, Air Industries was privately owned and had $60 million in net sales and 510 employees. Included in the purchase were Air Industries California real estate assets and the business assets of header tooling and punch die manufacturer Air Tuf Products Inc. of Phoenix. Air Industries became part of PCCs Fastener Products segment (formerly SPS Technologies) and Air Tuf is now part of PCCs Precision Tool segment.

2) Tinicum Capital Partners II L.P. acquired PennEngineering & Manufacturing Corp. in May for $302 million. The purchase price was comprised of $330.6 million in cash paid for PennEngineering shares at $18.25 per share (the company had cash and cash equivalents of $28.6 million). Founded in 1942, Danboro, PA-based PennEngineering manufactures proprietary fasteners at five U.S. plants and one each in Ireland and Italy, and has 1,360 employees. PennEngineerings 2004 net sales totaled $242.5 million with an EBITDA of $38.1 million and EBIT of $27.6 million. Members of the former senior management team of SPS Technologies Inc. assumed management of Penn-Engineering.

3) In its initial entry into the fastener industry, Home Depot Inc. acquired Crown Bolt Inc. and Brampton Fastener Co. Ltd. (Brafasco) in separate transactions for undisclosed purchase prices. Founded in 1981, Aliso Viejo, CA-based Crown Bolt was a privately owned supplier of fasteners and consumer hardware to retail hardware stores from four U.S. distribution warehouses. Home Depot was Crowns largest customer. Brampton, Ontario-based Brafasco was founded in 1966 and was one of Canadas leading suppliers of fasteners and industrial supplies to manufacturing and construction markets. Privately owned Brafasco operates 22 stocking branches in Canada and three in the U.S. Crown Bolt and Brafasco became part of Home Depot Supply the division supplying residential / commercial construction and MRO.

4) In July LISI Link Solutions for Industry acquired Knipping Verbindungstechnik GmbH for 75.5 million (US$92.1 million) in cash. Founded in 1939, Kierspe, Germany-based Knipping was a privately owned manufacturer of externally threaded fasteners and stamped components for European automotive and industrial markets. Knipping has 600 employees at four plants in Germany, one in Spain and sales offices in the UK and France. Knipping reported 2004 net sales of 97.7 million (US$124.6 m) and EBIT of 9 million (US$11.5 m). Belfort, France-headquartered LISI manufactures automotive and aerospace fasteners and reported sales of 600 million (US$765.2m).

5) Anixter International Inc. acquired Infast Group plc in July for £54 million (US$98.8m). The price included £39.5 million (US$74.1m) cash for Infast shares and £14.5 million (US$27.2m) of assumed debt. Gloucester, England-based Infast distributes fasteners and C class components to OEMs from 25 UK distributions centers and six in the U.S. Infast has 900 employees and reported 2004 net sales of £157.1 million (US$294.7m) and EBIT of £3.1 million (US$5.8m). Infast became part of Anixters OEM supply segment, which is comprised of acquired fastener distributors Pentacon (2002), Walters Hexagon (2003) and Distribution Dynamics (2004). Anixter is expected to cut costs by reducing Infasts overhead and consolidating service centers.

6) In July Park-Ohio Holdings Corp. acquired Purchased Parts Group Inc. through its Integrated Logistics Solutions (ILS) business unit for $7.5 million, including $7 million cash and an ST seller note of $500,000. Memphis-based PPG distributes fasteners and C class components to industrial and automotive customers. PPG was privately owned and operated 12 service centers in the U.S., UK and Mexico. PPG reported 2004 net sales of $74 million and 260 employees.

7) Ferguson Enterprises Inc. acquired Endries International Inc. in September for an undisclosed purchase price. Brillion, WI-based Endries distributes fasteners and C class components to OEMs from 70 service centers and in-plant stores in 30 U.S. states and smaller operations in Canada, UK and the Netherlands. Founded in 1970, Endries was privately owned with 500 employees. For the fiscal year ended July 31, 2005, Endries reported net sales of $149.5 million and gross assets of $57.7 million. Endries became part of Fergusons Commercial/Industrial Business Group, but continues to trade under the Endries name and is managed by Steve Endries. Ferguson distributes plumbing supplies and pipes, valves and fittings and is a subsidiary of Wolseley plc.

8) Trifast plc completed the acquisition of Serco Ryan Ltd. in October for £18 million (US$32 million), including £16 million (US$30m) cash and £2 million (US$3.8m) of Trifast stock. Serco Ryan had been a wholly owned subsidiary of UK-based MRO distributor Wyko Holdings Ltd. Serco Ryan, headquartered in Kidderminster near Birmingham, England, is a stocking distributor of fastener and industrial consumables to OEMs. Fasteners represent 70% of sales. Serco Ryan operates eight UK service centers with 200 people and reported £41.3 million (US$77.5m) and EBIT of £2.3 million (US$4.3m) for the fiscal year ending April 30, 2005. Trifast expects to consolidate branches, reduce total inventory and increase use of its Far East manufacturing base.

9) UMECO plc acquired Italian distributor Provest Srl for £13.8 million (US$24.2m) in October. The deal included £9.3 million (US$17.5m) cash plus up to £4.5 million (US$8.4m) paid to Provest shareholders over three years based on financial performance. Located near Milan, Provest distributes aerospace fasteners and related hardware primarily to OEMs. AgustaWestland is the largest customer. Provest reported 2004 net sales of £10.6 million (US$19.9m) and EBIT of £1.9 million (US$3.6m). With Provests end of 2004 gross assets of £8.8 million (US$16.5m), the cash payment at closing was 4.8 times trailing EBIT. If Provest achieves a comparable average annual EBIT over the three years following transaction closing the earn-out payments will yield a 7.3 times EBIT total purchase price.

10) During December, Trinity Hunt Partners LP acquired Lone Star Fasteners LP for $33.5 million. Spring, TX-based Lone Star manufactures standard and specialty fasteners and gaskets for extreme temperature, high pressure and corrosive environments. Lone Star has three business units: Lone Star Fasteners, Walker Bolt / Ameritech and Lone Star Sealing Technologies. Lone Star reported 2005 net sales totaled $35 million for a 50% increase since it was acquired in early 2004 from T-3 Energy Services Inc. by a six-member investment group led by CEO Bruce Ross. The group had purchased Lone Star for $7.7 million and thus realized a $25.8 million gain over the 22 months the group held Lone Star. Dallas-based Trinity Hunt Partners is a private equity firm specializing in middle-market leveraged acquisitions. The Lamar Hunt family is a major investor in Trinity Hunt Partners.

Editors Note: For additional information on the transactions or confidential investment banking services contact Richard Hagan, president of Pinnacle Capital Corporation, 130 Water St. #12G, New York, NY 10005-1615. Tel: 212 267-8200 Fax 212 267-7811 E-mail: rphagan@pinnaclecapitalcorp.com ©2006 GlobalFastenerNews.com