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A.M. Castle & Co. (CAS) (the “Company” or “Castle”), a global distributor of specialty metal and plastic products, value-added services and supply chain solutions, announced today that it has closed a transaction with Triple-S Tube Supply, LP and Triple-S Tube Supply ULC (collectively, “Triple-S Tube Supply”) for the sale of inventory from Castle’s Edmonton and Houston facilities that primarily service the oil and gas industries. Net cash proceeds of the transaction are expected to be approximately $27.5M, with ninety percent (90%) of the gross consideration paid at closing, and the remainder, subject to certain adjustments, payable by December 31, 2016. Net proceeds will be used to reduce borrowings outstanding under the Company’s revolving credit facility.
President and CEO Steve Scheinkman commented, “Today’s announced sale of the vast majority of our remaining energy-related inventory, including material that traces to the Company’s former Tube Supply acquisition, significantly reduces the Company’s exposure to oil-related market fluctuations. More importantly, sale of these assets will provide us with additional liquidity and is a further step in our recent refinancing activities to delever the Company’s balance sheet. The transaction serves to streamline our business as our future operations will be primarily focused on two key commercial end markets, Aerospace and Industrial. These markets tend to be more stable over the long-term and we believe our competitive position is strong and improving in both sectors. We also remain in active negotiations for the sale of our Total Plastics subsidiary, which will help to further delever our balance sheet. We are committed to completing our operating and financial restructuring activities in the near-term, and believe in our long-term opportunity to grow our Aerospace and Industrial business.”
Pat Anderson, Executive Vice President & Chief Financial Officer added, “In addition to these sales, we expect to generate further proceeds from the sale of equipment related to the facilities. Following the completion of the transfer of these energy-related assets to Triple-S Tube Supply, we will officially close our Houston and Edmonton facilities. We believe that the savings associated with the closing of these facilities will improve our ability to generate cash from operations, which we intend to reinvest in the business to better position the Company for long-term success.”
As a part of the transaction, Triple-S Tube Supply will also purchase the trade name rights to the Tube Supply brand. Castle will assist Triple-S Tube Supply in the transferring of the inventory from the facilities scheduled to be completed by December 31, 2016. Triple-S Tube Supply will provide its own sales staff and administrative support. A.M. Castle will transfer some of its employees from the Houston and Edmonton facilities to other Company locations, and other employees will be encouraged to join Triple-S Tube Supply.
The Company is currently evaluating the accounting implications of the transactions, which is expected to result in certain charges and/or write-downs of assets associated with the sale of inventory and closing of these locations.
-The 17th China(Guangzhou)
International Tube&Pipe Expo
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