Global Fastener News

May 10, 2005 FIN – The worldwide fastener industry experienced a significant pick-up in deal activity during 2004, “which is a very welcome change from the previous two years when deal-making in the industry was the slowest in more than ten years,’” Richard Hagan explained in announcing his eighth annual Top Ten Fastener Acquisitions of the Year list.

“The volume of transactions completed during 2004 was more than double that of 2003 – a year when we had difficulty identifying ten fastener deals which could actually be considered significant,”’ Hagan observed.
Hagan cited four very sizable deals’ as representing the increase in major transactions. The largest was the purchase of Hillman Companies Inc. by Code Hennessy & Simmons LLC for $510 million. The next three are the purchase of Ivaco Inc. by Heico Companies LLC for $284 million; the acquisition of the Borstlap Group by ABN AMRO Capital Ltd. for an undisclosed amount that Hagan estimated at more than $100 million; and the purchase of Heads & Threads International LLC by Capital Partners Inc. and Heads & Threads management for $54 million.
“Based on the number of deals completed and/or underway thus far in 2005, we are quite optimistic that deal-making in the fastener industry will gain momentum this year and continue at a strong pace for the foreseeable future,”’ Hagan predicted. ”There are numerous reasons for the pick-up in deal activity, but we believe the primary factors driving deal-making at this time are pent-up demand by potential sellers, and excellent financial and economic conditions for potential buyers.’”
“Many fastener company owners – such as someone seeking to retire in the near future – have been hesitant to offer their businesses for sale over the past couple of years because of the general lack of interest in making strategic acquisitions by the vast majority of industry players,’” Hagan explained. ”We believe that many fastener company owners have been sitting on the sidelines over the past couple of years weighing when is the right time for me to put my business on the market and many have decided or will soon decide that conditions for deal-making have significantly improved.”
Historically low interest rates, a general easing of credit restrictions by lenders and improvement in the U.S. and world economies have created “excellent financial and economic conditions for buyers,”’ Hagen noted.
The economy “seems to have ’bottomed’ during 2002-2003 and is headed on an upward path,”’ which means the “typical fastener manufacturer or distributor was forced to ‘fine tune’ operations and perhaps do some ’right-sizing’ over the past 2-3 years and is thus well positioned to capitalize on improving trading conditions,”’ Hagan pointed out.
Also price expectations of most fastener company sellers are ”generally more realistic now than during the 1998-2001 period when purchase price multiples peaked,’” Hagan finds.

Top 10 Deals of the 2004

(Arranged in chronological order)
1) In February 2004, UMECO plc (London Stock Exchange: UMC) purchased 80% of the outstanding common stock of privately-owned Tailored Logistics Corp. for an initial cash purchase price of £4.5 million (US$8.2 million).
Additional consideration is payable depending on Tailored Logistics financial performance in 2004. UMECO has the right to acquire the balance of the outstanding shares from 2007 onward based on a fixed multiple of trailing operating profits.
Tailored Logistics, located in Fort Worth, IN, is an aerospace fastener and assembly hardware distributor specializing in kitting solutions for the MRO requirements of the U.S. Department of Defense and the commercial aerospace market.
Following the transaction closing, Tailored Logistics will work closely with Abscoa Inc. (acquired in June 2001), UMECOs other U.S. aerospace fastener distributor headquartered in Fort Worth, TX.

2) In February Continental Midland LLC purchased Huck Automotive Fasteners from Alcoa Inc. (NYSE: AA) for an undisclosed price.
The four business units comprising Huck generated sales of more than $100 million in 2003 and employed 560 people.
Included in the transaction were Jacobson Manufacturing, a manufacturer of cold-formed male and female fasteners, operating from a 280,000 sq ft factory in Medina, OH; Continental/Midland, a manufacturer of cold-formed male fasteners and components, operating from a 300,000 sq ft factory in Park Forest, IL; Midwest Fastener, a manufacturer of cold-formed male fasteners, operating from a 103,000 sq ft factory in Valparaiso, IN; and MSD Stamping, a manufacturer of metal stampings and self-wrenching fasteners, operating from a 40,000 sq ft factory in Livonia, MI.
All four business units were acquired by Alcoa during 2000 and 2001.
The divestiture marks the exit of Alcoa from the business of supplying non-proprietary fasteners to the North American automotive market.
The acquisition marks the return of Robert S. Kaminski, owner of Continental Midland, to the automotive fastener business. Kaminski had been pursuing other interests since 1999, when he sold Continental/Midland for $106 million to Cordant Technologies Inc. Alcoa subsequently acquired Cordant in 2000.

3) In February Lone Star Fasteners LP purchased the fastener manufacturing operations of T-3 Energy Services Inc. (NASDAQ: TTES) for $7.7 million.
The purchase price consisted of $7.4 million cash paid at closing and two promissory notes totaling $300,000, with principal payments contingent upon the future performance of the operations sold.
Three business units were included: LSS-Lone Star-Houston Inc., a manufacturer and distributor of standard and metric fasteners for the industrial and petro-chemical markets; Walker Bolt Manufacturing Co., a small-batch manufacturer of fasteners for commercial and military applications; and Ameritech Fastener Manufacturing, a producer of specialty fasteners and components for the military and aerospace markets.
Upon the transaction closing, several members of the existing management team, including Judy Jandl, president of LSS-Lone Star-Houston, departed to pursue other business interests.

4) In March Code Hennessy & Simmons LLC purchased Hillman Companies Inc. from Allied Capital Corp. (NYSE: ALD) for a total purchase price of $510 million.
Hillman is a manufacturer and distributor of specialty hardware such as fasteners, keys, key duplication systems, identification tags, signage and picture hanging hardware supplying regional home centers (including Wal-Mart, Home Depot and Lowes), hardware stores, pet stores and mass merchants.
Hillman, headquartered in Cincinnati, OH, generated net sales of $351.6 million in 2004 and employs 1,800 people.
Allied Capital acquired Hillman in a management buy-out in 2001 and expanded the company with two bolt-on acquisitions during 2002, purchasing the Lowes specialty fastener operations of R&B Inc. and the FAS-N-IT and Anchor Wire/DIY division of Fastenal Co.
Code Hennessy & Simmons is a Chicago-based private equity firm with more than $1.5 billion of equity capital under management and a portfolio of 18 operating companies.

5) In April M&M Aerospace Hardware Inc., a wholly owned subsidiary of B/E Aerospace Inc. (NASDAQ: BEAV) purchased CMP SAS for an undisclosed amount.
CMP, located in Garges-Les-Gonesse (near Paris), is one of the leading distributors of aerospace fasteners and assembly hardware in France.
CMP supplies approximately 400 active customer accounts and derives 85% of revenue from the aerospace industry and 15% from automotive and industrial customers.
CMP operates from a 5,300 sq ft facility and employs 15 people. CMP has kitting programs in place with several blue chip aerospace OEMs in France and will enhance M&M Aerospaces ability to supply Airbus, the French military and both of their numerous suppliers and subcontractors.

6) In June Anixter International Inc. (NYSE: AXE) purchased Distribution Dynamics Inc. for $32.8 million in cash.
Eden Prairie, MN-based Distribution Dynamics distributes fasteners and assembly hardware to OEMs. The company generated sales of $76 million in 2003, operates from 16 U.S. locations and employs about 240 people.
Distribution Dynamics had been operating under Chapter 11 bankruptcy protection since April 2004 and was sold in an auction conducted by the U.S. Bankruptcy Court in Minnesota.
DDI signed an agreement to be acquired by Anixter for $25 million three days prior to its bankruptcy filing, but the auction process drew competing offers from Fastenal Co. Anixter ultimately agreed to pay the 31% higher purchase price.
Following the transaction closing, DDI was merged with the other fastener distribution operations of Anixter Pentacon (acquired in September 2002) and Walters Hexagon (acquired in September 2003) and the combined operations were renamed Anixter Fasteners.

7) In October, Simpson Manufacturing Co. Inc. (NYSE: SSD) purchased Quik Drive USA Inc. and its affiliated companies in Canada and Australia for a total purchase price of $37 million.
The deal consisted of $32 million cash paid at closing and $5 million of Simpson common stock.
Quik Drive manufacturers a proprietary line of collated screws and auto-feed screw driving attachments for power screwdrivers and screw guns. Quik Drive screws are used in a range of construction applications. Quik Drive products are marketed to contractors and the construction markets in North America, Australia and New Zealand.

8) In November ABN AMRO Capital Ltd., the private equity arm of ABN AMRO Bank N.V., purchased privately-owned Borstlap Group in a management buy-out for an undisclosed purchase price.
Borstlap, headquartered in Tilburg, the Netherlands, is an international stocking distributor of fastener products with more than 80 branches in 15 countries (Europe, Asia, North America and the Caribbean).
Borstlap, promoted as Masters in Fasteners,’ trades worldwide under the Fabory brand name.
Founded in 1947, Borstlap generated net sales of 214 million (US$276 million) in 2003 and employs more than 1,600 people worldwide.
ABN AMRO Capital acquired an 85% equity stake from the founding Borstlap family, with the companys management group owning the remainder of the equity.

9) In December Heico Companies LLC purchased Ivaco Inc. (Toronto Stock Exchange: IVA) for $284 million in cash.
Ivaco, headquartered in Toronto, Canada, is one of North Americas largest manufacturers of steel billets, hot-rolled bars & shapes, wire & processed rod and standard & specialty fasteners.
Ivacos major business units include: Ivaco Rolling Mills, Sivaco Wire Group, Infasco, Ingersoll Fasteners, Infasco Nut and Galvano.
Ivaco, which had been operating under Canadian bankruptcy protection since September 2003, recorded net sales of $622 million and a net loss of $142 million in 2003.
Ivaco employs approximately 2,200 people at 40 operating locations in Canada and the United States.
Heico, a Chicago-based investment firm owned by Michael Heisley, specializes in buying distressed companies and turning them around.
Forbes magazine listed Heico as the 117th largest U.S. private company in 2003 with $1.4 billion in net sales and 9,000 employees.

10) On December 31, 2004, Heads & Threads International LLC, a subsidiary of Alleghany Corp. (NYSE: Y), was purchased for $53.8 million cash in a management buyout by Capital Partners Inc. of Greenwich, CT, and the Heads & Threads management team.
HTI, headquartered in Bloomingdale, IL, is a leading importer and master distributor of commercial fasteners, selling to the North American distributor market.
HTI generated sales of $158.2 million and pre-tax earnings of $917,000 in 2004, a significant improvement over 2003 when the business recorded a pre-tax loss of $4.9 million (including restructuring charges).
HTI operates five distribution centers and six warehouses strategically located across the U.S.  ©2005/2014 Fastener Industry News.
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Editors Note: For addition information contact Richard Hagan, president of Pinnacle Capital Corporation, 74 Trinity Place #1205, New York, NY 10006. Tel: 212 267-8200 Fax 212 267-7811 E-mail: rphagan@pinnaclecapitalcorp.com ©