Advances AZZ's Previously Announced
Strategic Review of Assets; Establishes a
60%-40% Joint Venture to be Controlled by Fernweh Group
LLC.; Approximate Proceeds of $228 Million; Furthers the
Transformation of the Company into a Pure Play Metal Coatings
Company
FORT
WORTH, Texas, June 23,
2022 /PRNewswire/ -- AZZ Inc. ("AZZ" or the
"Company") (NYSE: AZZ), and Fernweh Group LLC
("Fernweh"), jointly announced today they have entered
into a definitive agreement whereby AZZ will contribute its AZZ
Infrastructure Solutions Segment1 ("AIS") to AIS
Investment Holdings LLC (the "AIS JV"), and sell a 60% interest in
the AIS JV to Fernweh at an implied enterprise value of AIS of
$300 million. The valuation
represents approximately 8.1x AIS LTM 2/28/2022 adjusted EBITDA2 of roughly
$37 million and is expected to result
in cash proceeds to AZZ of approximately $228 million, subject to certain customary
purchase price adjustments. Under the terms of the transaction, the
AIS JV will be governed by a board with three representatives from
Fernweh and two representatives from AZZ. Following the close of
the transaction, Fernweh will own 60% of the AIS JV and AZZ will
own 40%. The transaction is expected to close before the end of
2022, subject to obtaining the requisite governmental approvals and
other customary closing conditions and approvals.
AIS is a leading provider of specialized products and solutions
designed to support industrial and electrical applications. AIS's
product offerings include custom switchgear, electrical enclosures,
medium and high voltage bus ducts, and explosion proof and
hazardous duty lighting. In addition, AIS focuses on extension of
life cycle for the power generation, refining and industrial
infrastructure markets, through automated weld overlay solutions
for corrosion and erosion mitigation. The AIS business has
approximately 1,323 employees and operates through a global network
of 20 strategically located manufacturing facilities. For
fiscal year 2022, ended February 28,
2022, AIS generated sales of approximately $375 million.
In conjunction with the divesture of a majority stake in AIS and
in accordance with generally accepted accounting principles, the
Company is required to measure AIS at the lower of its carrying
amount or fair value less costs to sell. The Company will
complete this assessment in the second quarter of fiscal year 2023.
The result of this assessment will be recorded as part of
discontinued operations in the Company's financial statements, and
on a future basis, it is expected the continued investment in AIS
will be deconsolidated from the Company's financial statements and
accounted for under equity method of accounting.
Tom Ferguson, Chief Executive
Officer of AZZ, commented, "The agreement to divest a
controlling stake in AIS to Fernweh represents the continued
transition of AZZ into a focused industry leading provider of metal
coating and galvanizing solutions. While this transaction provides
AZZ with near-term cash, most importantly it also provides us an
opportunity to participate in AIS' value creation journey as it
strengthens its position in an attractive marketplace for its
specialized products and services. I am confident Fernweh's
management capability, operational and strategic
transformation support and capital provides the needed catalysts
for continued growth and expansion of AIS after a strong year of
bookings and backlog growth. I want to thank the dedicated
management team and employees at AIS for their numerous years of
contributions to AZZ and wish them continued success as we enter
this joint venture arrangement together."
"We are excited by the opportunity to acquire a majority
stake in AIS and look forward to working with management to
continue to strengthen and grow the business. The company has
a range of strategic growth opportunities in energy,
infrastructure, data center, and other sectors, as well as unique
capabilities to support marquee customers in these end markets. The
acquisition is aligned with Fernweh's investment thesis in the
industrials sector and will be a strategic platform on which to
build a major electrical and industrial business. We look forward
to welcoming the AIS colleagues to the Fernweh family and
establishing a long and fruitful partnership with Tom, and the AZZ
team," said Nick Santhanam, CEO of Fernweh Group.
About AZZ Inc.
AZZ Inc. is a global provider of galvanizing and a variety of
metal coating solutions, coil coating solutions welding solutions,
specialty electrical equipment and highly engineered services to a
broad range of markets, including, but not limited to, the power
generation, transmission, distribution, refining and industrial
markets. AZZ's Metal Coatings segment is a leading provider
of metal finishing solutions for corrosion protection, including
hot-dip galvanizing, spin galvanizing, powder coating, anodizing
and plating, to the North American steel fabrication
industry. AZZ's Precoat Metals Segment is a leading provider
of aesthetic and corrosion protective coatings to the North
American steel and aluminum coil market. AZZ's Infrastructure
Solutions segment (AIS) is dedicated to delivering safe and
reliable transmission of power from generation sources to end
customers, and automated weld overlay solutions for corrosion and
erosion mitigation to critical infrastructure in the energy and
waste management markets worldwide.
About Fernweh Group LLC
Fernweh is a principal investment firm launched by leaders from
global institutions, who have extensive prior experience working
with companies in the industrial and industrial technology sectors
on strategy, M&A, and operational transformation. Fernweh
believes that companies in the mid- and small-cap industrial and
industrial technology sectors are the engine of the economy. By
tailoring cutting-edge management capability, operational and
strategic transformation support, and capital for each company's
unique context, history, and needs, Fernweh aims to be a builder of
businesses and create value for all stakeholders.
Non-GAAP Financial Measures
Some of the financial information and data contained in this
press release, such as adjusted EBITDA, have not been prepared in
accordance with Generally Accepted Accounting Principles in
the United States ("GAAP"). The
Company's management believes that the presentation of these
non-GAAP financial measures provides investors with a greater
transparency comparison of operating results across a broad
spectrum of companies, which provides a more complete understanding
of the Company's financial performance, competitive position and
prospects for the future. Management also believes that investors
regularly rely on non-GAAP financial measures, such as adjusted
EBITDA, to assess operating performance and that such measures may
highlight trends in the Company's business that may not otherwise
be apparent when relying on financial measures calculated in
accordance with GAAP.
While the Company believes these non-GAAP measures are useful in
evaluating the Company's performance, this information should be
considered as supplemental in nature and not as a substitute for or
superior to the related financial information prepared in
accordance with GAAP. Additionally, these non-GAAP financial
measures may differ from similar measures presented by other
companies.
Safe Harbor Statement
Certain statements herein about our expectations of future
events or results constitute forward-looking statements for
purposes of the safe harbor provisions of The Private Securities
Litigation Reform Act of 1995. You can identify forward-looking
statements by terminology such as "may," "should," "expects,"
"plans," "anticipates," "believes," "estimates," "predicts,"
"potential," "continue," or the negative of these terms or other
comparable terminology. Such forward-looking statements are based
on currently available competitive, financial and economic data and
management's views and assumptions regarding future events. Such
forward-looking statements are inherently uncertain, and investors
must recognize that actual results may differ from those expressed
or implied in the forward-looking statements. Certain factors could
affect the outcome of the matters described herein. This press
release may contain forward-looking statements that involve risks
and uncertainties including, but not limited to, changes in
customer demand for our products and services, including demand by
the power generation markets, electrical transmission and
distribution markets, the industrial markets, and the metal
coatings markets. In addition, within each of the markets we
serve, our customers and our operations could potentially continue
to be adversely impacted by the ongoing COVID-19 pandemic,
including governmental issued mandates regarding the same. We could
also experience additional increases in labor costs, components and
raw materials, including zinc and natural gas, which are used in
our hot dip galvanizing process; supply-chain vendor delays;
customer requested delays of our products or services; delays in
additional acquisition or disposition opportunities; currency
exchange rates; availability of experienced management and
employees to implement AZZ's growth strategy; a downturn in market
conditions in any industry relating to the products we inventory or
sell or the services that we provide; economic volatility or
changes in the political stability in the
United States and other foreign markets in which we operate;
acts of war or terrorism inside the
United States or abroad; and other changes in economic and
financial conditions. AZZ has provided additional information
regarding risks associated with the business in AZZ's Annual Report
on Form 10-K for the fiscal year ended February 28, 2022 and other filings with the
Securities and Exchange Commission ("SEC"), available for viewing
on AZZ's website at www.azz.com and on the SEC's website at
www.sec.gov. You are urged to consider these factors
carefully in evaluating the forward-looking statements herein and
are cautioned not to place undue reliance on such forward-looking
statements, which are qualified in their entirety by this
cautionary statement. These statements are based on information as
of the date hereof and AZZ assumes no obligation to update any
forward-looking statements, whether as a result of new information,
future events, or otherwise.
1 Excludes AZZ Crowley Tubing
2 See press release and earnings presentation dated
April 22,2022 for a reconciliation of
Non-GAAP Adjusted Earnings Measures for fiscal year 2022
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SOURCE AZZ Inc.