Diversified global
industrial company Harsco Corporation HSC today announced an agreement
to sell Harsco's Infrastructure division into a joint venture with Clayton,
Dubilier & Rice ("CD&R") under a transaction that will combine the
Infrastructure division with Brand Energy & Infrastructure Services, Inc.
("Brand"), which CD&R is simultaneously acquiring from First Reserve. The
combined company, which will continue under the name Brand Energy &
Infrastructure Services, will be a leading, single-source provider of
specialized industrial services to the worldwide energy and infrastructure
sectors. Upon closing of the transaction, Harsco will receive cash proceeds of
approximately $300 million and a 29 percent equity stake in the combined
company, which has an enterprise value of approximately $2.5 billion.
"This transaction is the first major step in the strategic transformation of
Harsco," said Patrick Decker, Harsco President and Chief Executive
Officer. "It follows a period of extensive consideration and offers a number
of compelling benefits to our shareholders. First, it immediately strengthens
the financial profile of the Company while providing the financial flexibility
to pursue higher return, higher growth opportunities. Second, it reduces the
complexity of our business, consistent with our objectives for internal
simplification and greater operating efficiency. Third, by maintaining an
equity position in a stronger and more profitable combined business, Harsco
stands to benefit from the additional value that will be created by the new
venture."
Transaction Benefits to Harsco
• Strengthens Harsco's financial profile. Immediately upon the close of the
transaction, Harsco will receive approximately $300 million in cash, which
will significantly strengthen the Company's balance sheet and enable the
Company to reallocate capital to higher-return opportunities. On a pro forma
basis, Harsco expects the transaction to improve margins, be immediately
accretive to earnings in the first year after close and improve the Company's
return on capital.
• Positions Harsco to pursue opportunities with attractive return and growth
profiles. Harsco believes there are a number of organic growth and bolt-on
acquisition opportunities to create differential value and generate improved
returns and growth.
• Reduces the complexity of the Harsco portfolio. This transaction is
aligned with Harsco's stated objectives to generate more attractive returns
and improve the underlying performance of its businesses, particularly its
Metals & Minerals segment. Under its ongoing Simplification initiative, Harsco
is streamlining its operational structure and processes to improve internal
execution and efficiency. Going forward, Harsco expects to reduce its overhead
cost profile commensurate with its reduced complexity and simplified
structure.
• Creates the opportunity for additional value creation. Harsco will benefit
from its equity position in a stronger and larger business with a more
diversified portfolio of services and offerings.
The New Brand Energy & Infrastructure Services
Pro forma 2013 annual revenues for the combined company are estimated at
nearly $3 billion and EBITDA margin is expected to be in the low double
digits. Approximately two-thirds of the combined company's revenues are
expected to be generated from the energy sector, with a significant level of
recurring revenue driven by required maintenance work.
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