Synalloy (SYNL) Acquires Specialty Pipe & Tube in $31.5M Cash Deal

Synalloy (NASDAQ: SYNL) has acquired Specialty Pipe & Tube, Inc. ("Specialty"). Specialty is a master distributor of seamless carbon pipe, with a focus on heavy wall, large diameter products. End markets for its products include oil and gas, heavy equipment and other industrial businesses where high-pressure applications are required. Specialty was established in 1964 and has distribution centers in Mineral Ridge, Ohio and Houston, Texas. The company generates approximately $30 million in annual revenue and has fewer than 30 employees. The transaction will be accretive to Synalloy's earnings in the first year following the closing. BB&T Capital Markets served as the exclusive financial advisor to Specialty.

The all-cash transaction is valued at $31.5 million, subject to working capital adjustments post-closing, and potential earn-out payments up to $5 million over two years should the business unit achieve targeted sales revenue.

The acquisition was funded with a combination of cash on hand, additional term debt ($10 million with a five year maturity), and an increase in the company's line of credit from $25 million to $40 million. Synalloy estimates that its total net debt at the end of 2014 will be approximately $35.4 million.

Including the acquisition of Specialty, Synalloy's guidance for 2015 is as follows:

• Total Revenue - $232 million (Q1 - $56 million; Q2 - $57 million; Q3 - $60 million and Q4 - $59 million)
• Gross Profit - $43 million (Q1 - $10 million; Q2 - $11 million; Q3 - $12 million and Q4 - $10 million)
• Adjusted EBITDA - $28.5 million (Q1 - $6 million; Q2 - $7.5 million; Q3 - $7.5 million and Q4 - $7.5 million)
• EPS - $1.54 (Q1 - $.36; Q2 - $.38; Q3 - $.41 and Q4 - $.39)

Synalloy projects that EPS will increase by approximately $.40 per share over 2014, with half of the increase coming from organic growth and the other half coming from the acquisition of Specialty.

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