Universal Acquires Patriot Special Metals
Universal Stainless & Alloy Products Inc., Bridgeville, Pa., has acquired the assets of fledging producer Special Metals, North Jackson, Ohio. Patriot Special Metals is a substantially completed greenfield facility that includes a radial forge in the initial startup phase and a vacuum induction melting facility scheduled to be completed by Universal Stainless for production in the first quarter of 2012.
The facility also includes two vacuum arc remelt furnaces, scheduled for a fourth-quarter 2011 startup, and related equipment for heat treating and finishing long products, including trepanning.
Additionally, in conjunction with the acquisition, Universal approved a $6 million capital expenditure for the addition of an electroslag remelt furnace to be installed in North Jackson, enhancing the company’s ability to respond to the recovery in power generation demand.
“This acquisition will significantly strengthen our industry position, enabling Universal to better respond to the needs of customers and to seize additional global opportunities in the aerospace, power generation, petrochemical and heavy industrial markets. We expect that with the addition of the North Jackson facility, the company will substantially increase revenues and more than double net income by 2014,” says Chairman, President and CEO Denny Oates.
This acquisition will broaden the production capabilities of Universal, expand its product range in higher-value, higher-margin products and enable its entry into new market niches, the company claims. Specifically, the addition of the largest hydraulic radial forge in the Western Hemisphere will expand the company’s products to include large and long forged squares, rounds, bars and custom shapes for aerospace, power generation, petrochemical and general industrial tool steel and shafting applications.
Adding VIM-VAR capability will enable Universal to enter selected global high nickel alloy and super alloy markets for aerospace parts, landing gear, helicopter rotor masts and gears, and nonmagnetic drill collars for oil and gas exploration, the company says.
“Most of this is driven by our customers saying we’d like you to continue to supply additional metal in different forms and shapes. As we looked at those requests from customers, and our desire to grow our business and our current manufacturing capabilities, there were some obvious gaps,” Oates says.
Numerous specialty metals producers also have expressed strong interest in utilizing the unique characteristics of the radial forge to supplement their in-house hot working capacity, the company says. In the past, it was Universal that had to work with third-party providers to handle some of those requirements, a more costly and time-consuming process.
The radial forge will make a significant positive contribution to customer service by further reducing cycle and lead times on existing business. The ability to process larger, longer pieces is expected to improve yields while producing excellent cross-sectional integrity, Universal claims.
Lastly, the additional business acquired due to the capabilities of the forge will increase the utilization of the recently upgraded melt shop at the Bridgeville plant.
“We’ve been improving our mix of products, supplying the market with more technically demanding, higher margin products over the last several years,” Oates says. “This is a natural evolution.”
The purchase price for the Special Metals assets was $104.5 million, subject to certain adjustments and an additional $25 million for the completion of equipment installation. The transaction is expected to close by the end of the month.