Latrobe Steel sold to Reading company for $558 million
By Joe Napsha
Published: Tuesday, June 21, 2011,
Latrobe Specialty Metals Inc. has been sold to a Reading-area specialty metals producer in a $558 million deal that both sides said Monday will benefit the Latrobe operations.
Carpenter Technology Corp., a Wyomissing-based manufacturer that makes and sells stainless steel and specialty alloys, considers the future "much brighter" for both companies operating as one business, said Carpenter CEO William A. Wulfsohn, in a conference call with analysts.
The two metals producers operate "adjacent businesses" for many of their target markets -- aerospace, oil and natural gas and defense, he said.
Latrobe Specialty Metals, which retain its name and operate as a unit of Carpenter Technologies, was "very profitable because they are efficient," Wulfsohn said. The deal will expand Carpenter's production capacity because of Latrobe Specialty's forge press and manufacturing capabilities, he said.
"The Latrobe plant was the reason that Carpenter was interested," said Steven E. Karol, managing partner and founder of The Watermill Group of Lexington, Mass., which owned the Latrobe company along with Hicks Equity Partners.
"They got a really good plant (Latrobe). The future is very bright," Karol said.
The deal, expected to be completed by Sept. 30, will give the owners of Latrobe Specialty Metals 8.1 million shares of Carpenter stock, which represents about $388 million at the current value. Carpenter also agreed to pay $170 million in cash to eliminate Latrobe Specialty Metal's debt and reimburse transaction costs.
Carpenter Technology stock jump to $51.92, up $4.04, or 8.44 percent, yesterday.
The sale means that Latrobe Specialty Metals is scrapping plans for a $175 million public stock offering announced in May, which Kroll said was part of ownership's long-term strategy. Thomas O. Hicks, CEO of Hicks Equity Partners, said in a statement that the acquisition by Carpenter "provides superior benefits for all our stakeholders."
The plan to take Latrobe Specialty Metals public contributed to the timing of the acquisition, said Douglas Ralph, Carpenter's chief financial officer. Carpenter took a "detailed, harder look" at Latrobe Specialty Metals and began meeting with senior management to discuss a combination of the companies, Ralph said.
"We went full speed ahead," with the sale, Kroll said, culminating in the deal that executives said was not reached until Sunday.
Watermill and Hicks Holding have owned Latrobe Specialty Metals since December 2006, when it was purchased from Timken Co. of Canton, Ohio, for $215 million, plus $35 million in assumed liabilities. Kroll declined to say how much of a return they made on their investment.
The ownership group invested $60 million into building the world's largest vacuum induction melting furnace at the Latrobe plant, which came online in 2009 when other manufacturers were cutting production, Kroll said.
The deal will expand Carpenter Technology's presence in Western Pennsylvania, where it operates plants in Washington and Bridgeville. The company has 3,500 employees worldwide.
Latrobe Specialty Metals had plans to expand its operations into another plant for titanium production, possibly at a site in Washington County, West Virginia or Ohio, but those plans are on hold, said Dale Mikus, chief financial officer.
No layoffs are planned at the Latrobe plant. Jobs may change, but management anticipates there will be opportunities for all of the existing work force, Mikus said.
Latrobe Specialty Metals has 800 employees. About 380 production and maintenance workers at the Latrobe plant are represented by the United Steelworkers Local 1537. Their current five-year contract, which does not expire until 2013, will be honored, Mikus said. It has a wage reopener clause in July, which will require negotiations with the union in the next few weeks, Mikus said.
Gary Cook, president of USW Local 1537, could not be reached for comment.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.