Friedman Industries Acquires Plateplus Operations For $63.8M In Cash, 516,041 Shares Of Friedman's Common Stock

 Friedman Industries, Incorporated ("Friedman") (NYSE:FRD), a Texas-based company engaged in steel processing and distribution as well as pipe manufacturing through its division Texas Tubular Products, announced today that it has acquired two high-quality, strategically located facilities from Plateplus, Inc. ("Plateplus"), positioning Friedman as a leading North American steel service center with an expanded geographic presence, scale and processing capabilities. In addition to the facilities acquired, Friedman also purchased the steel inventory and customer relationships at two additional Plateplus locations. The parties executed an agreement related to the transaction on April 26, 2022 and closed the transaction effective at the end of business on April 30, 2022.
 

Friedman acquired the real estate, buildings, equipment, inventory, and other assets of Plateplus' East Chicago, IN and Granite City, IL facilities. In addition, Friedman has acquired the steel inventory and customer relationships at Plateplus' Loudon, TN and Houston, TX facilities. Business that was historically handled at Plateplus' Loudon and Houston locations will be transitioned to Friedman's facilities in Decatur, AL and Sinton, TX, respectively, providing immediate and meaningful operating efficiencies and cost synergies.

"Over the last several years, we have strategically invested in enhanced processing capabilities to meet virtually all customer needs, including our new stretcher leveler at our Decatur, AL facility and our new facility in Sinton, TX, that is expected to open later this year," said Mike Taylor, President & Chief Executive Officer of Friedman. "This transaction and the processing capabilities it provides significantly enhance the strategic value of these recent investments. We are transforming our company with leading technologies and a broader geographic reach that will allow us to serve more customers with a larger portfolio of leading products. It catapults Friedman to a new level of providing quality, reliability and best-in-market product capability so we can more effectively service customers across North America."

Under the terms of the agreement, Friedman acquired the assets for $63.8 million in cash and 516,041 shares of Friedman's common stock. Fixed assets account for approximately $18 million of the purchase price with the remainder attributable to steel inventory. The final purchase price is subject to adjustment based on final inventory and assumed liabilities. Friedman financed the transaction through the expansion of its asset-based lending facility provided by JPMorgan Chase from $75 million to $150 million. After funding the transaction, Friedman's borrowed balance under the facility was $72.5 million.

The acquired facilities provide temper passed cut-to-length sheet and plate with capabilities ranging from 16 gauge to 5/8" thick and width from 36" to 72". The facilities will operate as part of Friedman's coil product segment. The transformative acquisition is expected to more than double the annual volume of the coil product segment. Friedman's coil segment sales volume for the twelve months ended March 31, 2022 was 152,000 tons. The sales volume for the acquired facilities was 163,000 tons for the same twelve-month period. Friedman strongly believes volume at the acquired facilities can be expanded further. Sales volume for the Loudon and Houston locations was 113,000 tons for the same twelve-month period. Friedman strongly believes it will be able to transfer substantially all of this volume to its Decatur and Sinton facilities. Friedman expects the transaction to be immediately accretive to operating results.

The acquired facilities offer highly efficient freight access, enabling Friedman to reach customers more efficiently with shortened lead times, which is expected to enhance customer satisfaction and Friedman's competitiveness. Importantly, all Friedman locations are located on or near water, and five of six locations have rail receiving capabilities. These logistics help with supply optionality which Friedman believes is critical to success. With the Plateplus assets, Friedman will have a presence in the top steel consuming markets in North America, with facilities in East Chicago, IN; Granite City, IL; Hickman, AR; Decatur, AL; Lone Star, TX; and Sinton, TX.

The transaction also combines the two companies' expansive customer and supplier networks, resulting in new opportunities to drive sales growth across a larger customer base and yielding additional supply chain efficiencies. By combining the Granite City and East Chicago facilities with Friedman's existing operations and transferring volume from Plateplus' Loudon and Houston facilities to Friedman facilities, Friedman expects to operate the new structure with cost and operating efficiencies, which should have an immediate impact on profitability. Friedman also anticipates further opportunities to enhance efficiencies through the additional throughput that is expected.

Friedman's management team has deep familiarity with the acquired Plateplus assets, customers and key metal suppliers. Taylor previously served as President of Cargill's metals service center business when the acquired facilities were part of the Cargill metals service center portfolio.

"I have worked closely with these assets and the talented teams at the East Chicago and Granite City facilities and welcome these employees to Friedman," continued Taylor. "We also look forward to working alongside Plateplus' current owner, Metal One Corporation, which will become a valued and important shareholder of Friedman and brings domestic and global metals supply chain expertise."

Additional information related to the transaction is available on the investors portion of Friedman's website.

Montrose Advisors served as financial advisor and Norton Rose Fulbright served as legal advisor to Friedman Industries for this transaction.