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August 26, 2021

Precision Castparts Corp. To Acquire Special Metals Corporation In Accretive Transaction

PORTLAND, Oregon – August 26, 2021 – Precision Castparts Corp. (NYSE: PCP) has entered into a definitive agreement to acquire Special Metals Corporation (SMC), a world leader in the production of high-performance nickel-based alloys and super alloys, for approximately $540 million in cash, including the repayment of SMC’s outstanding debt.

“The acquisition of Special Metals clearly meets all of our criteria for profitable growth and will be instrumental in driving Precision Castparts to new levels of performance” said Mark Donegan, chairman and chief executive officer of Precision Castparts Corp. (PCC). “First and foremost, it will provide us with an internal supply of nickel-based billet for our Forged Products operations, enabling us to manage our overall value stream more cost effectively from raw material to forged component. Other than producing some billet at our WASA facility in Australia, we are currently buying all of our billet on the outside. As the leading user of premium-grade nickel in the world, we can see significant top- and bottom-line benefits through increasing SMC’s volume, improving their yields, and decreasing the overall lead time to the marketplace.

“Synergies are also central to the SMC story,” Donegan continued. “Like Wyman-Gordon and SPS Technologies, SMC is an asset-intensive, process-driven, manufacturing business with many upside performance opportunities. We introduced PCC’s process control and productivity tools into Wyman-Gordon and SPS, driving significant bottom-line improvements throughout their operations. Those cost savings continue on a daily basis. With the same approach, the same tools, and the same disciplined focus, we fully expect the same type of integration success with SMC.

“Improved operational performance drives market penetration and sales increases,” Donegan said. “In addition, SMC will both strengthen and diversify our sales profile. Along with holding well-established positions in aerospace and power generation, SMC manufactures a comprehensive small-diameter pipe product line, which will enable us to continue our successful penetration of the seamless, extruded pipe market. The ability to offer these products with Wyman-Gordon’s large-diameter pipe will dramatically expand the breadth of our product line and create a much greater opportunity for us to bid on larger portions of projects. And, as with Wyman-Gordon and SPS, SMC opens up new opportunities for us in adjacent markets, such as the chemical, oil and gas, and pollution control industries, all of which present exciting growth potential. Overall, we view SMC as a key platform for organic growth, with future performance improvements comparable to those we’ve achieved and continue to achieve with our most recent acquisitions.”

The acquisition will be immediately accretive to earnings, before the impact of synergies. PCC expects to realize synergies of $10 million to $15 million in the first 12-15 months following closing of the transaction, with annual synergies reaching $30 million to $40 million in the out years, as well as significant cash generation opportunities as SMC is brought more in line with the working capital levels of PCC’s current metal-melting operations.

PCC will finance the acquisition with cash on hand and its existing credit facilities, which currently have undrawn capacity of approximately $550 million, while continuing to retain a strong balance sheet. As with the Wyman-Gordon and SPS acquisitions, PCC expects to realize significant cost reductions and synergies in SMC in the near term, along with strong cash generation from base operations, driving rapid repayment of acquisition debt and assuring a strong balance sheet and credit profile going forward.

The transaction has been approved by the boards of both companies, as well as by holders of more than 90 percent of the common stock of SMC, and is not subject to a financing contingency or approval by PCC’s shareholders. Subject to regulatory approvals, including Hart-Scott-Rodino, the transaction is anticipated to close in the third quarter of fiscal 2006.

Citigroup Global Markets served as financial advisor to PCC, Stoel Rives LLP served as legal counsel to PCC, and Jones Day served as legal advisor to SMC.

About the Companies
Precision Castparts Corp.: PCC, headquartered in Portland, Oregon, is a worldwide, diversified manufacturer of complex metal components and products. It serves the aerospace, power generation, automotive, and general industrial and other markets. PCC is the market leader in manufacturing large, complex structural investment castings, airfoil castings, and forged components used in jet aircraft engines and industrial gas turbines. The Company is also a leading producer of highly engineered, critical fasteners for aerospace, automotive, and other markets.

Special Metals Corporation: Privately-held SMC, headquartered in Huntington, West Virginia, is the world’s largest and most diversified producer of high-performance nickel-based alloys and super alloys. The company, which has been a pioneer in developing diverse applications for nickel and in inventing such widely used alloys as INCONEL® alloy 718 and MONEL® alloy 400, manufactures the widest variety of nickel-alloy product forms, including ingot, billet, atomized powder, pipe, plate, sheet, coil, rod, and wire. Its specialty metals are used in some of the world’s most technically demanding industries and applications, including aerospace, power generation, chemical processing, and oil exploration. SMC’s 10 U.S. and European production facilities and a global distribution network supply more than 5,000 customers and every major world market for high-performance nickel-based alloys. The company employs more than 2,700 people.

SMC Financial Highlights
6 Months Ended
June 30, 2021 (1)
Revenues $474.2
Operating Income 26.5
Operating Margin 5.6%

Cash & Cash Equivalent $22.7
Total Debt (2) 245.4

Net Working Capital (3) $ 336.3

Notes:
(1) Unaudited results for six month period ending June 30, 2021
(2) Reflects total debt, excluding unamortized discount on senior notes of $14.3 mm as of 6/30/05
(3) Non-cash current assets, less non-debt current liabilities

Conference Call Information
PCC will host a live conference call to discuss the transaction on August 26, 2005, at 7:00 a.m. Pacific Daylight Time. The dial in information for audio access is 800-289-0496 (pass code 9974299). Dial *0 for technical assistance. Individuals interested in monitoring the webcast should click the link below for access to the live audio presentation:

SMC Acquisition Announcement Webcast

In order to assure the conference begins in a timely manner, please dial in 5 to 10 minutes prior to the scheduled start time. Access can also be gained through Precision Castparts Corp.'s corporate website:
http://www.precast.com/PCC/CorpPres.html


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Information included within this press release describing projected growth and future results and events constitutes forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results in future periods may differ materially from the forward-looking statements because of a number of risks and uncertainties, including but not limited to fluctuations in the aerospace, power generation, automotive, and other general industrial cycles; the relative success of the Company’s entry into new markets; competitive pricing; the financial viability of the Company’s significant customers; the availability and cost of energy, materials, supplies, insurance, and pension benefits; equipment failures; relations with the Company’s employees; the Company’s ability to manage its operating costs and to integrate acquired businesses in an effective manner; governmental regulations and environmental matters; risks associated with international operations and world economies; the relative stability of certain foreign currencies; and implementation of new technologies and process improvement. Any forward-looking statements should be considered in light of these factors. The Company undertakes no obligation to publicly release any forward-looking information to reflect anticipated or unanticipated events or circumstances after the date of this document.

Posted by Industrial at August 26, 2021 03:04 PM

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