Harsco Closes Deal To Sell Infrastructure Unit Into Joint Venture With CD&R

(RTTNews) - Diversified industrial company Harsco Corp. (HSC) and private equity firm Clayton, Dubilier & Rice or CD&R said Tuesday that they have closed the previously announced deal to sell Harsco's infrastructure unit into a joint venture between Harsco and CD&R.

The joint venture will combine the Infrastructure division with Brand Energy & Infrastructure Services, Inc., that was simultaneously acquired by CD&R from First Reserve.

The new, combined company will operate under the name Brand Energy & Infrastructure Services and will be a single-source provider of multi-craft industrial services, forming & shoring and total access solutions to the global energy and infrastructure sectors.

Harsco said it will receive cash proceeds of about $300 million from the transaction and an about 29 percent equity interest in the joint venture.

Patrick Decker, President and CEO of Harsco said, "Not only does this transaction immediately strengthen Harsco's financial profile, but we have also obtained an equity stake in a stronger combined company with an improved competitive position and significant growth opportunities. We believe our shareholders will benefit as this new larger enterprise leverages its leadership position, delivers meaningful cost and operating synergies and capitalizes on the expected market recovery."

Brand Energy Chairman and CEO Paul Wood will continue to serve as chairman and chief executive officer of the combined company. CD&R Partner John Krenicki, Jr., former vice chairman of General Electric Co. (GE) and President and CEO of GE Energy, will serve as lead director.

Harsco will be represented on the combined company's board by CEO Patrick Decker as well as Stuart Graham, Harsco Board Member and Chairman of construction group Skanska AB. Brand will retain its existing headquarters in Kennesaw, Georgia.

Harsco said that financing for the transaction was led by Morgan Stanley, Citigroup Global Markets Inc., Goldman Sachs Bank USA and UBS Investment Bank, in addition to HSBC Securities (USA) Inc., ING Capital LLC, Natixis Securities Americas LLC, RBS Securities Inc., SG Americas Securities, LLC, and SunTrust Robinson Humphrey, Inc.

Harsco had earlier announced the deal in mid-September, saying it agreed to sell its infrastructure division to CD&R in a cash and stock deal valued at about $525 million. CD&R will then combine the division with Brand Energy & Infrastructure Services, Inc., which it is acquiring from First Reserve, to create a new joint-venture company with an enterprise value of about $2.5 billion, including $1.7 billion in debt financing.

For Harsco, the deal provides it with immediate strengthening of its financial profile while providing the financial flexibility to pursue higher return, higher growth opportunities. It also stands to gain from the additional value that will be created by the new joint venture as it maintains an equity position in the stronger and more profitable combined business.

Further, the deal is in line with Harsco's stated objectives to generate more attractive returns and improve the underlying performance of its businesses, particularly its Metals & Minerals segment. Harsco also expects to reduce its overhead cost profile due to its reduced complexity and simplified structure.

In a separate statement, Clayton, Dubilier & Rice said its funds will hold a majority position in the new company, which will generate about $3 billion in pro forma revenues. About 80 percent of pro forma annual revenues are derived from services provided to energy and industrial end markets, while two-thirds come from customers' recurring maintenance needs.

HSC closed Tuesday's trading at $26.15, down $0.07 or 0.27 percent on a volume of 404,609 shares.