Watermill and Hicks Announce Completion of Latrobe Specialty Metals Merger with Carpenter Technology Corp
Strategy Transforms Small Steel Division into Specialty Metals Leader, Delivering 10x Return
Lexington, Mass. and Dallas, Texas – February 29, 2012 – The Watermill Group, a strategy-driven private investment firm, and Hicks Equity Partners (“HEP”), the private equity investment vehicle of the Thomas O. Hicks family, today announced the completion of the merger between Latrobe Specialty Metals, Inc. and Carpenter Technology Corporation (NYSE: CRS).
In the transaction, 8.1 million shares of Carpenter stock, representing an equity value of approximately $558 million at the time of announcement, have been issued to the current owners of Latrobe, including The Watermill Group and HEP. This represents a 10x gross return on the investment.
Steven E. Karol, Founder and Managing Partner of Watermill and Thomas O. Hicks, Chairman and Chief Executive Officer of HEP have joined Carpenter’s Board of Directors.
Purchased in December 2006 for $215 million in cash from The Timken Company (NYSE: TKR), Latrobe manufactures and distributes high-performance specialty metals and alloys with manufacturing operations in Pennsylvania, Ohio, Texas and the United Kingdom. At the time of Latrobe’s acquisition from Timken, the company was a small, under-supported division of Timken with $345 million in sales and 800 employees. Six years later, Latrobe has grown to become a respected industry leader with close to $600 million in sales and more than 900 employees.
The Watermill Group has extensive expertise supporting large multinational corporations in divesting and growing their non-strategic divisions. Watermill is known for its ability to use innovative business strategies, not just financial engineering, to reposition companies and realize untapped market potential.
“When we first acquired Latrobe, Timken needed a partner to support a seamless corporate spinoff,” said Steven E. Karol, Founder and Managing Partner at The Watermill Group. “At the time, Latrobe was producing tool steel, high-speed steel and specialty carbon-based steel, predominantly for the aerospace industry as a division of a large global manufacturer. We knew with the right strategy this minor division could be transformed into a vibrant market leader in specialty metals. It’s very gratifying to see this original vision realized with the completion of a merger that delivers a superior return.”
HEP has considerable experience and success partnering with management teams to build the value of industrial businesses through a wide range of growth initiatives.
Mr. Hicks said, “Our investment in Latrobe is a dynamic growth story involving a business realizing its significant potential in partnership with supportive equity partners. We are very proud of what’s been accomplished at Latrobe and excited about its continued strong prospects as part of Carpenter. We look forward to supporting Carpenter as a major shareholder and member of the Board.”
To revitalize and grow Latrobe, Watermill and HEP charted a course to migrate the company’s product offerings into higher-quality, higher-value applications—specifically complex, specialized carbon- and nickel-based materials for the aerospace, defense, energy and oil services industries. Together, Watermill and HEP made substantial investments in people and equipment to reposition Latrobe as a valued supplier to these influential markets.
“This is a momentous and exciting time for our companies. The future is not only bright, but rich with endless possibilities and opportunities,” said Carpenter’s Chief Executive William Wulfsohn.
About The Watermill Group
The Watermill Group (www.watermill.com) is a strategy-driven private investment firm that revitalizes companies to drive superior returns. For over three decades, The Watermill Group has been acquiring, operating and improving companies. Watermill looks for businesses at a crossroads and applies a unique combination of strategic insight and management expertise to drive growth. The Watermill Group’s other current portfolio companies include FutureMark Paper Company, C&M Corporation and MultiLayer Coating Technologies, LLC.
About Hicks Equity Partners
Hicks Equity Partners is the private equity arm for Hicks Holdings LLC, a holding company for the Thomas O. Hicks family’s assets. With 35 years of private equity experience, Mr. Hicks pioneered the “buy and build” strategy of investing and founded Hicks Muse Tate & Furst, which raised more than $12 billion of private equity across six funds and completed over $50 billion of leveraged acquisitions. HEP looks for established companies with proven track records, strong free cash flow characteristics, a strong competitive industry position and an experienced management team looking to partner with long-term capital.