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AZZ Inc. ("AZZ" or the "Company") (NYSE: AZZ), a global provider of galvanizing and metal coating solutions, welding solutions, specialty electrical equipment and highly engineered services for maintaining and building critical infrastructure, and Sequa Corporation ("Sequa"), a portfolio company of global investment firm Carlyle (NASDAQ: CG), jointly announced today that they have entered into a definitive agreement whereby AZZ will acquire Sequa's Precoat Metals business division ("Precoat") for a purchase price of approximately $1.28 billion. When adjusted for the net present value of approximately $150 million of expected net tax benefits, the net purchase price is approximately $1.13 billion, which represents approximately 8.2x Precoat's adjusted EBITDA for the twelve months ended December 31, 2021.
Headquartered in St. Louis, Missouri, Precoat is the leading independent provider of metal coil coating solutions in North America. Precoat engages in the advanced application of protective and decorative coatings and related value-added services for steel and aluminum coil primarily serving the construction; appliance; heating, ventilation and air conditioning (HVAC); container; transportation and other end markets. Precoat has approximately 1,100 employees and operates a network of 13 strategically located manufacturing facilities with 15 coating lines and 17 value-added processing lines. For the twelve months ended December 31, 2021, Precoat generated revenue of approximately $700 million and adjusted EBITDA of approximately $137 million.
Tom Ferguson, Chief Executive Officer of AZZ, commented, "We are pleased to acquire North America's largest independent provider of metal coil coatings and related services. Through this acquisition, AZZ significantly broadens our metal coatings offering, creating unrivaled scale and breadth of solutions in both the prepainted and post-fabrication coatings markets. We believe the coil coating market will provide sustainable future growth for AZZ, and we intend to provide Precoat with the financial resources to expand and further invest in commercial and operational excellence. This acquisition is consistent with our previously communicated strategy prioritizing North American coatings targets with strong strategic fit that are accretive within the first year of operation, and it is a testament to our commitment to drive profitable growth. This acquisition represents a continued transition of AZZ from a diverse holding company to a focused provider of coating and galvanizing services for critical applications. We welcome Precoat's talented employees and management team to AZZ and look forward to a seamless integration with uninterrupted industry-leading service to their customers."
Kurt Russell, President of Precoat, commented, "This is an exciting milestone for Precoat Metals. Through our 60-year history, Precoat has been part of several great organizations, and I believe AZZ is an excellent cultural fit for our company. This acquisition provides a great opportunity for Precoat to continue our core growth strategies in support of our customers, while bringing a level of diversification to AZZ's existing strong metal coating and finishing capabilities."
"I would like to thank the Precoat team for all of their contributions to Sequa," said Tom Mepham, Chief Executive Officer of Sequa. "Precoat has been an important and valuable part of the Sequa story through its history, and I am excited for its next chapter with AZZ and for the future of Chromalloy as a focused, standalone high-growth aerospace and aeroderivative aftermarket business."
The acquisition is anticipated to be immediately and substantially accretive to AZZ's adjusted earnings per share. Not including Precoat, AZZ upgrades its fiscal year 2022 revenue guidance to $890 million to $910 million and now expects to generate fiscal year 2022 earnings per share of $3.15 to $3.25, exceeding the Company's prior guidance of $3.00 to $3.20.
AZZ expects to fund the transaction with a combination of cash on hand, newly issued debt financing and the issuance of equity or equity-linked securities. Following the transaction, deleveraging will be a near-term capital allocation priority of the Company. AZZ expects significant post-closing deleveraging driven by the strong free cash flow generation of the combined business and remains committed to paying a dividend on its common stock while continuing to support profitable growth initiatives. The transaction is expected to close in the first quarter of AZZ's fiscal year 2023 and is subject to customary closing conditions and regulatory approvals.
Citi acted as financial advisor to AZZ and Baker & McKenzie LLP served as legal counsel in connection with the transaction. Citi and Wells Fargo provided committed debt financing for the transaction. Ernst & Young Capital Advisors, LLC served as independent capital advisor to the Company.
Evercore and Barclays acted as financial advisors to Sequa Corporation and Latham & Watkins LLP served as legal counsel in connection with the transaction.
AZZ Inc. will conduct a conference call to discuss the transaction Tuesday, March 8, 2022, at 11:00 A.M. ET. Interested parties can access the conference call by dialing (844) 855-9499 or (412) 317-5497 (international). A webcast of the call will be available on the Company's Investor Relations page at http://www.azz.com/investor-relations .
A replay of the call will be available at (877) 344-7529 or (412) 317-0088 (international), replay access code: 1365031, through March 15, 2022, or by visiting http://www.azz.com/investor-relations .
There will be a slide presentation accompanying today's event. The Company's slide presentation for the call will be available on the Investor Relations page at http://www.azz.com/investor-relations .
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