June 25, 2018 / 6:45 AM / a month ago

Austria's Andritz buys U.S. firm Xerium for $833 million in cash

VIENNA (Reuters) - Austrian engineering group Andritz (ANDR.VI) has agreed to buy Xerium Technologies (XRM.N), a supplier of paper industry products, in a $833 million cash deal that helps diversify its offerings.

FILE PHOTO: A zoomed image of the logo of Austrian machinery maker Andritz during a news conference in Vienna, Austria, March 4, 2016. REUTERS/Heinz-Peter Bader

The move will enable Andritz, which produces machinery for hydro power, metal pressing and pulp and paper production, to strengthen its position in the paper industry, which Xerium supplies with parts and services.

“The acquisition fits squarely with our long-term strategy to execute complementary acquisitions and to grow our after market business with its stable source of revenue and earnings,” said Andritz’s Chief Executive Wolfgang Leitner.

Investors appreciated the deal. Andritz stock jumped 5.7 percent, the top gainer in Austria's blue-chip index .ATX. Shares in Xerium Technologies, which has had a high debt position for years but is highly profitable, surged 99 percent to $13.21.

James Mitarotonda, chairman and CEO of Barington Capital Group, a New York-based activist investor that owns about 5.05 percent of Xerium, said it was pleased with the deal, which helps “unlock the company’s tremendous value potential for shareholders.”

Barington, which disclosed its stake in April, had previously urged the company to explore a sale.

The Austrian group will acquire Xerium for $13.50 per share in cash, in a transaction valued at approximately $833 million, including net financial liabilities of around $590 million, Andritz said.

Xerium’s board of directors has already approved the deal, as well as 20 percent of its shareholders.

Xerium makes and supplies machine clothing and roll covers for paper, tissue, and board machines, including maintenance and after market services. It provides a sophisticated digital software tool to optimize pressing performance by means of sensors integrated into the roll covers.

The Youngsville, North Carolina-headquarterd company operates 28 manufacturing facilities in 13 countries including one site in Austria, according to its website. It reported an operating income of $54.8 million on sales of $481 million in 2017.

Andritz had sales of 5.9 billion euros ($6.9 billion) and earnings before interest, tax, depreciation and amortization (EBITDA) of 542 million euros last year.

It posted net liquidity of 734 million euros, available credit lines of 145 million euros and surety lines of 5.89 billion euros end-March.

“Financing has not been announced but as half the net cash includes customer pre-payments, we would assume some additional debt financing,” said Jefferies analysts in a note to clients.

Deutsche Bank, which expects Andritz’s EBITDA to stay flat this year, calculates the deal to be 17 percent accretive on the expected EBITDA level.

Reporting by Kirsti Knolle and Francois Murphy; additional reporting by Liana B. Baker; editing by Jason Neely, Jan Harvey and David Gregorio

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