Friedman Industries, Incorporated (“Friedman”) (NYSE American:
FRD), a Texas-based company engaged in steel processing and
distribution as well as pipe manufacturing through its division
Texas Tubular Products, announced today that it has acquired two
high-quality, strategically located facilities from Plateplus, Inc.
(“Plateplus”), positioning Friedman as a leading North American
steel service center with an expanded geographic presence, scale
and processing capabilities. In addition to the facilities
acquired, Friedman also purchased the steel inventory and customer
relationships at two additional Plateplus locations. The parties
executed an agreement related to the transaction on April 26, 2022
and closed the transaction effective at the end of business on
April 30, 2022.
Friedman acquired the real estate, buildings, equipment,
inventory, and other assets of Plateplus’ East Chicago, IN and
Granite City, IL facilities. In addition, Friedman has acquired the
steel inventory and customer relationships at Plateplus’ Loudon, TN
and Houston, TX facilities. Business that was historically handled
at Plateplus’ Loudon and Houston locations will be transitioned to
Friedman’s facilities in Decatur, AL and Sinton, TX, respectively,
providing immediate and meaningful operating efficiencies and cost
synergies.
“Over the last several years, we have strategically invested in
enhanced processing capabilities to meet virtually all customer
needs, including our new stretcher leveler at our Decatur, AL
facility and our new facility in Sinton, TX, that is expected to
open later this year,” said Mike Taylor, President & Chief
Executive Officer of Friedman. “This transaction and the processing
capabilities it provides significantly enhance the strategic value
of these recent investments. We are transforming our company with
leading technologies and a broader geographic reach that will allow
us to serve more customers with a larger portfolio of leading
products. It catapults Friedman to a new level of providing
quality, reliability and best-in-market product capability so we
can more effectively service customers across North America.”
Under the terms of the agreement, Friedman acquired the assets
for $63.8 million in cash and 516,041 shares of Friedman’s common
stock. Fixed assets account for approximately $18 million of the
purchase price with the remainder attributable to steel inventory.
The final purchase price is subject to adjustment based on final
inventory and assumed liabilities. Friedman financed the
transaction through the expansion of its asset-based lending
facility provided by JPMorgan Chase from $75 million to $150
million. After funding the transaction, Friedman’s borrowed balance
under the facility was $72.5 million.
The acquired facilities provide temper passed cut-to-length
sheet and plate with capabilities ranging from 16 gauge to 5/8”
thick and width from 36” to 72”. The facilities will operate as
part of Friedman’s coil product segment. The transformative
acquisition is expected to more than double the annual volume of
the coil product segment. Friedman’s coil segment sales volume for
the twelve months ended March 31, 2022 was 152,000 tons. The sales
volume for the acquired facilities was 163,000 tons for the same
twelve-month period. Friedman strongly believes volume at the
acquired facilities can be expanded further. Sales volume for the
Loudon and Houston locations was 113,000 tons for the same
twelve-month period. Friedman strongly believes it will be able to
transfer substantially all of this volume to its Decatur and Sinton
facilities. Friedman expects the transaction to be immediately
accretive to operating results.
The acquired facilities offer highly efficient freight access,
enabling Friedman to reach customers more efficiently with
shortened lead times, which is expected to enhance customer
satisfaction and Friedman’s competitiveness. Importantly, all
Friedman locations are located on or near water, and five of six
locations have rail receiving capabilities. These logistics help
with supply optionality which Friedman believes is critical to
success. With the Plateplus assets, Friedman will have a presence
in the top steel consuming markets in North America, with
facilities in East Chicago, IN; Granite City, IL; Hickman, AR;
Decatur, AL; Lone Star, TX; and Sinton, TX.
The transaction also combines the two companies’ expansive
customer and supplier networks, resulting in new opportunities to
drive sales growth across a larger customer base and yielding
additional supply chain efficiencies. By combining the Granite City
and East Chicago facilities with Friedman’s existing operations and
transferring volume from Plateplus’ Loudon and Houston facilities
to Friedman facilities, Friedman expects to operate the new
structure with cost and operating efficiencies, which should have
an immediate impact on profitability. Friedman also anticipates
further opportunities to enhance efficiencies through the
additional throughput that is expected.
Friedman’s management team has deep familiarity with the
acquired Plateplus assets, customers and key metal suppliers.
Taylor previously served as President of Cargill’s metals service
center business when the acquired facilities were part of the
Cargill metals service center portfolio.
“I have worked closely with these assets and the talented teams
at the East Chicago and Granite City facilities and welcome these
employees to Friedman,” continued Taylor. “We also look forward to
working alongside Plateplus’ current owner, Metal One Corporation,
which will become a valued and important shareholder of Friedman
and brings domestic and global metals supply chain expertise.”
Additional information related to the transaction is available
on the investors portion of Friedman’s website.
Montrose Advisors served as financial advisor and Norton Rose
Fulbright served as legal advisor to Friedman Industries for this
transaction.
ABOUT FRIEDMAN INDUSTRIESFriedman Industries,
Incorporated (“Company”), headquartered in Longview, Texas, is a
manufacturer and processor of steel products with operating plants
in Hickman, Arkansas; Decatur, Alabama; East Chicago, Indiana;
Granite City, Illinois and Lone Star, Texas. The Company has two
reportable segments: coil products and tubular products. The coil
product segment consists of the operations in Hickman, Decatur,
East Chicago and Granite City where the Company processes
hot-rolled steel coils. The Hickman, East Chicago and Granite City
facilities operate temper mills and corrective leveling cut-to
length lines. The Decatur facility operates a stretcher leveler cut
to length line. The Company has an additional coil segment location
under construction in Sinton, Texas with operations expected to
commence in August 2022. The tubular product segment consists of
the operations in Lone Star where the Company manufactures electric
resistance welded pipe and distributes pipe through its division
Texas Tubular Products.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This news release contains forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act, and such statements involve risk and uncertainty.
Forward-looking statements include those preceded by, followed by
or including the words “will,” “expect,” “intended,” “anticipated,”
“believe,” “project,” “forecast,” “propose,” “plan,” “estimate,”
“enable,” and similar expressions, including, for example,
statements about our business strategy, our industry, our future
profitability, growth in the industry sectors we serve, our
expectations, beliefs, plans, strategies, objectives, prospects and
assumptions, future production capacity, future hedging activity,
expected opening of our Sinton facility, the timing of business
transfer completion from Plateplus’ operations in Loudon and
Houston to Friedman’s operations in Decatur and Sinton, the impact
of this transaction on future sales volume, product quality and
estimates and projections of future activity and trends in the oil
and natural gas industry. These forward-looking statements may
include, but are not limited to, future changes in the Company’s
financial condition or results of operations, future production
capacity, product quality and proposed expansion plans.
Forward-looking statements may be made by management orally or in
writing including, but not limited to, this news release.
Forward-looking statements are not guarantees of future
performance. These statements are based on management’s
expectations that involve a number of business risks and
uncertainties, any of which could cause actual results to differ
materially from those expressed in or implied by the
forward-looking statements. Although forward-looking statements
reflect our current beliefs, reliance should not be placed on
forward-looking statements because they involve known and unknown
risks, uncertainties and other factors, which may cause our actual
results, performance or achievements to differ materially from
anticipated future results, performance or achievements expressed
or implied by such forward-looking statements. Actual results and
trends in the future may differ materially depending on a variety
of factors including, but not limited to, changes in the demand for
and prices of the Company’s products, the continuing impact of the
COVID-19 pandemic, changes in government policy regarding steel,
changes in the demand for steel and steel products in general and
the Company’s success in executing its internal operating plans,
including the cost, timing and successful commissioning of our new
stretcher leveler line in Sinton, changes in and availability of
raw materials, our ability to satisfy our take or pay obligations
under certain supply agreements, unplanned shutdowns of our
production facilities due to equipment failures or other issues,
the results of our hedging activities, increased competition from
alternative materials and risks concerning innovation, new
technologies, products and increasing customer requirements.
Accordingly, undue reliance should not be placed on our
forward-looking statements. Such risks and uncertainty are also
addressed in our Management’s Discussion and Analysis of Financial
Condition and Results of Operations and other sections of the
Company’s filings with the U.S. Securities and Exchange Commission
(the “SEC”) under the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended (the “Exchange Act”),
including the Company’s Annual Report on Form 10-K and its other
Quarterly Reports on Form 10-Q. We undertake no obligation to
publicly update or revise any forward-looking statement, whether as
a result of new information, future events, changed circumstances
or otherwise, except to the extent law requires.
CONTACT:Mr. Alex LaRueChief Financial Officer,
Secretary and Treasurer(903)758-3431
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