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2006-03-16 News Headlines
Tooling company Kennametal divests supply unit Global supplier of tooling, engineered components and advanced materials, Kennametal, sells industrial supply business unit to MSC Industrial Direct.
Kennametal Inc. (NYSE: KMT) announced today that it has signed a definitive
agreement with MSC Industrial Direct Co., Inc. (NYSE: MSM), to sell Kennametal's
J&L Industrial Supply business for $349.5 million. The disposition
of this unit is in line with the continued execution of Kennametal's strategy
to concentrate on its core manufacturing businesses. The J&L divestiture
completes the company's planned exit from owned distribution and will
allow Kennametal to build new and grow existing distributor relationships.
This also presents an excellent opportunity for Kennametal to improve
customer options by delivering its full range of products to customers
through the strongest distribution partners. The divestiture, which is expected to close in the second calendar quarter of 2006, (fourth fiscal quarter for Kennametal), remains subject to customary regulatory approval and negotiated conditions of closing. Goldman, Sachs & Co. is serving as financial advisor to Kennametal in this transaction. As a part of the transaction, Kennametal will recognize an estimated $228.6 million pre-tax gain in the quarter ending June 30, 2006, including transaction related expenses, resulting in an earnings-per-share impact of about $3.25. The company expects to redeploy this capital in the next 12-24 months with strategic initiatives. Kennametal immediately plans to accelerate its manufacturing rationalization opportunities. This investment is expected to have a cost impact of approximately $0.55 to $0.70 per share and a payback of less than three years. Proceeds from the sale will be used to further build shareholder value over the long term in a manner consistent with the company's previously stated priority uses of cash, including but not limited to the following: - Acquisitions in Kennametal's core businesses, with emphasis on advancedmaterials
and engineered components, conducted according to adisciplined process
that is part of the Kennametal Value Business System (KVBS). Founded in 1941, MSC is one of the premier national suppliers of maintenance, repair and operations products and services. J&L Industrial Supply is a leading specialty metalworking distributor in North America, with a comprehensive product offering of metal cutting tools, abrasives, hand and power tools, precision measuring tools, work holding and tool holding products, machine tools and accessories used in metal cutting operations. The unit reported total annual sales of $257.5 million and operating income of $27.1 million in fiscal year 2005. "We are very pleased with this agreement and are confident that
this divestiture, in alignment with our strategy, enables us to accelerate
strategic growth plans as we build and manage our corporate portfolio
of technologies," commented Kennametal President and CEO, Carlos
M. Cardoso. "J&L has been a great success story with a committed
team that has consistently delivered strong growth and margins. Our goal
was to find a partner for J&L that could accelerate its growth, add
incremental value to customers, and be a good home for J&L employees.
MSC is a great match and will be able to fully leverage J&L's capabilities.
In turn, J&L will remain a major distributor of Kennametal product
and an important strategic channel partner. MSC will have access to the
Kennametal portfolio of brands, and the Kennametal brand will be marketed
through MSC and J&L as the premier brand of indexable cutting tool
products," Cardoso concluded. Kennametal Inc. is a leading global supplier of tooling, engineered components
and advanced materials consumed in production processes. The company improves
customers' competitiveness by providing superior economic returns through
the delivery of application knowledge and advanced technology to master
the toughest of materials application demands. Companies producing everything
from airframes to coal, from medical implants to oil wells and from turbochargers
to motorcycle parts recognize Kennametal for extraordinary contributions
to their value chains. Customers buy over $2.3 billion annually of Kennametal
products and services-delivered by our 14,000 talented employees in over
60 countries-with almost 50 percent of these revenues coming from outside
the United States.
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