Harsco Corporation today announced an agreement to sell Harsco’s Infrastructure division into a joint venture with Clayton, Dubilier & Rice under a transaction that will combine the Infrastructure division with Brand Energy & Infrastructure Services (“Brand”), which CD&R is simultaneously acquiring from private equity firm First Reserve.
Harsco will receive approximately $300 million in cash and a 29 percent equity stake in the combined company initially valued at $225 million, valuing Harsco’s Infrastructure division at $525 million. The enterprise value of the combined company is estimated to be approximately $2.5 billion, which includes $1.7 billion in debt financing. A commitment for financing the transaction has been provided by Morgan Stanley, Citigroup Global Markets, Goldman Sachs Bank USA and UBS Investment Bank.
The combined company, which will continue under the name Brand Energy & Infrastructure Services, will be a single-source provider of specialized industrial services to the worldwide energy and infrastructure sectors. Brand’s portfolio of service offerings includes work access, specialty coatings, blasting, insulation, refractory, corrosion protection, weatherproofing and other related soft crafts. Brand operates in four key energy sectors: refining, Canadian oil sands, petrochemical and power generation. The company also serves the infrastructure construction markets throughout North America and in strategic international regions. The new company will be headquartered in the Atlanta suburb of Kennesaw, the current headquarters of Brand (www.beis.com).
Brand Energy & Infrastructure Services expects to achieve pro forma 2013 annual revenues of nearly $3 billion and the EBITDA margin is expected to be in the low double digits. Approximately two-thirds of the combined company’s revenues are expected to be generated from the energy sector, with a significant level of recurring revenue driven by required maintenance work.
Paul Wood, current Chairman and Chief Executive Officer of Brand, will continue to serve in this role in the combined company. The Board of Directors will include representatives from CD&R, Brand and Harsco. CD&R Partner John Krenicki, former vice chairman of General Electric Company and former head of its energy business, will serve as Lead Director.
“We are excited to help build a global leader in both specialized industrial services and infrastructure services,” said Nathan Sleeper, a CD&R Partner. “We believe that the combined company has a well-positioned global platform, very favorable growth prospects and a deep set of capabilities to serve customers across its diverse end markets.”
“The integration with Harsco Infrastructure directly aligns with our company’s strategy to expand our specialty service offering. The combination of these two groups of strong local operating companies and management teams creates a true global leader in both specialized industrial services and forming & shoring. The resulting global footprint will enable us to offer best in class operating capabilities to our customers in the growing energy and infrastructure markets,” said Mr. Wood.
Lead advisor Robert W. Baird & Co. and Credit Suisse acted as financial advisors to Harsco. Morgan Stanley, Citi, Goldman Sachs & Co. and UBS Investment Bank acted as financial advisors to CD&R with respect to the Harsco Infrastructure transaction, and Citi, Goldman Sachs & Co. and UBS Investment Bank acted as financial advisors to CD&R with respect to the Brand Energy & Infrastructure Services transaction.
Clayton, Dubilier & Rice focuses on producing financial returns through building stronger more profitable businesses. Since inception, the firm has managed the investment of more than $18 billion in 56 businesses representing a range of industries with an aggregate transaction value of approximately $90 billion. Founded in 1978, Clayton, Dubilier & Rice is based in New York and London (www.cdr-inc.com).
Harsco Corporation is a diversified business serving the steel and metals production, construction, railways and energy industries. The company is based in Camp Hill, PA (near Harrisburg) (www.harsco.com).
© 2013 PEPD • Private Equity’s Leading News Magazine • 9-17-13
