Quanex Building Products Announces Strategic Acquisition of LMI Custom Mixing, LLC Assets
November 01 2022 - 4:15PM
Quanex Building Products Corporation (NYSE: NX) (“Quanex” or the
“Company”) today announced the acquisition of substantially all the
assets of LMI Custom Mixing, LLC (“LMI”) for $92 million, or $79
million, net of the present value of $13 million in anticipated
future cash tax benefits. The transaction will be funded with
cash-on-hand and borrowings on the Company’s existing revolving
credit facility. Quanex expects to realize approximately
$500,000 in synergies in the first year following the
acquisition. The Company expects LMI to generate revenue of
approximately $80 million and an EBITDA margin of approximately 15%
in fiscal 2023.
LMI is a state-of-the-art custom polymer mixer
that produces high-quality, customized rubber compounds used in a
variety of applications in complementary and attractive diversified
industrial end markets, including fenestration, where LMI has been
a supplier to Quanex for approximately 20 years. LMI has a
highly customer centric model with a reputation for cutting-edge
compound development using state-of-the-art machinery.
Key Strategic Benefits of the
Combination:
- Fits squarely within Quanex’s material science and process
engineering expertise
- Expands product portfolio into a new, attractive category with
significant growth opportunities
- Vertical integration and cost savings through supply of
compounds to Quanex’s existing IG spacers business in North
America, which is located on the same site as LMI’s Cambridge, OH
plant
- Familiar, complementary operations represent low execution and
integration risk
Key Financial Benefits of the
Combination:
- Attractive effective purchase price multiple
- Immediately accretive to adjusted EPS
- Improves consolidated margin profile
- Meets Quanex return hurdles within 3 years
- Pro forma balance sheet remains strong
George Wilson, President and Chief Executive
Officer of Quanex, stated, "The acquisition of LMI is consistent
with the “Growth with Purpose” strategy we recently unveiled and
represents an important first step on our path to generating at
least $2 billion in annual revenue. Part of our strategy is
to acquire businesses that help us grow in new and existing
markets, reinforce our leadership positions, as well as enhance
scale to create a more effective platform to drive growth and share
gains. The acquisition of LMI delivers on all aspects of this
strategy as it adds capabilities well-aligned with our material
science and process engineering expertise while expanding our
product offering into an attractive category with significant
organic and inorganic growth opportunities. In addition,
Quanex has a long-tenured relationship with LMI and we firmly
believe the addition of LMI’s complementary capabilities will help
deliver on our long-term growth strategy. We look forward to
a seamless integration that will deliver solid results over time
for our employees, customers and shareholders.”
Kevin Gray, President, Chairman and CEO of LMI’s
parent company, Lauren International, added, “Quanex is the
preferred buyer for this business and a great home for LMI.
Quanex is a clear leader in the industries it serves and presents a
strong fit with LMI’s custom compounding capabilities. I
believe in the value that can be created for our customers by
combining these companies and I’m excited for the LMI team to join
the Quanex brand.”
Quanex has posted a presentation on its website
(http://www.quanex.com) in the Investors section under Events &
Presentations that provides a summary of the transaction's
strategic rationale and financial benefits.
Bank of America served as exclusive financial
advisor to Quanex Building Products in connection with the
transaction.
About Quanex
Quanex is a global manufacturer with core
capabilities and broad applications across various end
markets. The Company currently collaborates and partners with
leading OEMs to provide innovative solutions in the window, door,
vinyl fencing, solar, refrigeration and cabinetry markets.
Looking ahead, Quanex plans to leverage its material science
expertise and process engineering to expand into adjacent
markets.
About LMI
LMI Custom Mixing is a state-of-the-art custom
polymer mixer. The company focuses on advanced methods for mixing
rubber compounds for the most demanding applications across a range
of industries, including building products, automotive and wire and
cable.
Forward Looking Statements
Statements that use the words “estimated,”
“expect,” “could,” “should,” “believe,” “will,” “might,” or similar
words reflecting future expectations or beliefs are forward-looking
statements. The forward-looking statements include, but are not
limited to, the following: impacts from public health issues
(including pandemics, such as the recent COVID-19 pandemic) on the
economy and the demand for Quanex’s products, the Company’s future
operating results, future financial condition, future uses of cash
and other expenditures, expenses and tax rates, expectations
relating to Quanex’s industry, and the Company’s future growth,
including any guidance discussed in this press release. The
statements and guidance set forth in this release are based on
current expectations. Actual results or events may differ
materially from this release. For a complete discussion of
factors that may affect Quanex’s future performance, please refer
to the Company’s Annual Report on Form 10-K for the fiscal year
ended October 31, 2021, and the Company’s Quarterly Reports on Form
10-Q under the sections entitled “Cautionary Note Regarding
Forward-Looking Statements” and “Risk Factors”. Any
forward-looking statements in this press release are made as of the
date hereof, and Quanex undertakes no obligation to update or
revise any forward-looking statements to reflect new information or
events.
Non-GAAP Terminology Definitions and
Disclaimers
Adjusted EPS is a non-GAAP financial measures that Quanex
believes provide a consistent basis for comparison between periods
and more accurately reflects operational performance, as it is not
influenced by certain income or expense items not affecting ongoing
operations. EBITDA (defined as net income or loss before interest,
taxes, depreciation and amortization and other, net) is a non-GAAP
financial measures that the Company uses to measure operational
performance and assist with financial decision-making. A
reconciliation of LMI’s projected EBITDA margin (which is defined
as LMI’s projected EBITDA divided by LMI’s projected revenue,
stated as a percentage) to a corresponding GAAP measure is not
included in the release because it is not available without
unreasonable effort, since various items required for the
reconciliation are outside of Quanex’s control or cannot be
predicted (including by virtue of Quanex having not owned LMI until
the date of the release). Quanex believes that these non-GAAP
measures provide a consistent basis for comparison between periods
and will assist investors in understanding the Company’s financial
performance when comparing results to other investment
opportunities. These non-GAAP measures may not be the same as
those used by other companies. Quanex does not intend for
this information to be considered in isolation or as a substitute
for other measures prepared in accordance with U.S. GAAP.
Scott Zuehlke
SVP, Chief Financial Officer & Treasurer
713-877-5327
scott.zuehlke@quanex.com
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