Dec 19 2006
Harris Steel Group Inc., or "Harris Steel" today announced the signing of definitive agreements to acquire the wire and wire mesh manufacturing business and assets of LEC Steel Inc. ("LEC") of Brantford, Ontario.
The transaction is to be structured as an asset purchase. The purchase price is estimated to be $16.5 million including the assumption of certain liabilities. The purchase price includes approximately $4.2 million that will be allocated to intangible assets including goodwill. The final purchase price will be paid in cash and will be subject to working capital adjustments. A breakdown of the purchase consideration will be provided in the notes to the consolidated financials for the period in which the transaction closes.
Management expects this acquisition to be accretive to earnings, adding a range of Cdn$0.04 - $0.07 earnings per share on an annualized basis.
LEC is a privately held corporation founded in 1990 as a processor of wire, mesh and construction accessory products. This product line is complementary to the wire and wire mesh products manufactured by Harris Steel's industrial products segment. Wire and mesh will continue to be manufactured out of LEC's facility in Brantford, as well as out of the existing Harris Steel location in Burlington, Ontario. Post-closing, we expect to utilize both manufacturing facilities to continue to serve our customers, and provide a platform for future growth.
Paul Kelly, President of Harris Steel Group Inc., commented, "We have known, respected and competed with LEC for the last 16 years. Their positioning in construction wire and mesh markets complements our strength. We are excited about welcoming the LEC employees to our team, and look forward to the opportunities that this transaction presents."
We caution that management's estimate of the earnings per share impact includes assumptions regarding the operation of LEC post-transaction. We are making certain assumptions based on data available to us in the derivation of this calculation and actual results may vary. When the transaction closes, we intend to integrate and manage the operations of LEC with those of our existing wire and wire mesh operations. Accordingly, there will be no accounting for LEC separate from the accounting for our wire and wire mesh operations, thereby making it impractical if not impossible to report performance against this estimate at a future point in time.
The transaction is subject to customary closing conditions and is expected to close in January, 2007.