Leading Supplier of Engineered Equipment to
the Defense and Aerospace/Space Industries
- Barber-Nichols is a premier supplier of specialty
turbomachinery, pumps and electronic drives that address critical
applications for the defense and aerospace/space industries
- Highly-engineered products and solutions include advanced
propulsion systems and integrated fluid, thermal and power
generation systems for extreme environments
- Acquisition accelerates Graham’s diversification strategy; over
80% of combined backlog now in the defense industry
- Proven track record of growth with multi-year visibility;
Current backlog of $100 million with approximately $40 million to
convert into revenue in fiscal 2022
- Provides a scalable platform for organic and acquisitive growth
in the defense, aerospace, advanced power generation, cryogenic and
energy storage markets
- Expected to be immediately accretive to EPS, including shares
issued for purchase
- Daniel J. Thoren, formerly President and CEO of Barber-Nichols,
appointed to Graham’s executive team as President and Chief
Operating Officer
- Management to discuss the acquisition on today’s teleconference
at 11:00 am ET
Graham Corporation (NYSE: GHM) (“Graham” or the “Company”), a
global business that designs, manufactures and sells critical
equipment to the oil refining, petrochemical and defense
industries, today announced that it has completed the acquisition
of management-owned Barber-Nichols Inc. (“BNI”) for $70.1 million
in a combination of 87% cash and 13% stock. The Company also
announced it has entered into new credit facilities including a
5-year term loan to finance a portion of the purchase price.
With $56 million in revenue and low-double digit EBITDA margins,
BNI designs and manufactures specialty turbomachinery including
highly specialized pumps, compressors and fans, and rocket engine
turbopumps for critical applications, primarily in the defense and
space industries.
James R. Lines, Graham’s Chief Executive Officer, commented, “We
are excited to announce the acquisition of BNI which is
transformative for Graham and immediately amplifies our financial
performance. It significantly increases our sales and earnings,
accelerates our diversification into the less-cyclical defense
sector, and provides a platform for strong growth with a broader
range of engineered solutions. This combination positions Graham
for higher, more stable growth as well as an improving margin
profile with room for expansion.”
He continued, “Known for their entrepreneurial culture,
innovation, creativity, and specialized product development along
with their design-for-manufacturing and engineering expertise, BNI
has built excellent brand recognition over the years. With proven
capabilities for product development for critical industries’
demanding requirements, BNI’s strong brand attracts opportunities
for new product design projects and strategic partnerships. These
have been drivers of its backlog growth and provides multi-year
visibility. We welcome their extensive engineering capabilities,
industry know-how and long-history of innovation. Our core energy
and petrochemicals platform will continue to be an important
contributor to our future and, when complemented by a much larger
and more diverse defense and aerospace platform, we believe our
earnings power and shareholder value are magnified.”
Compelling Strategic Rationale
- Accelerates diversification strategy; expands exposure to the
defense industry and brings new higher growth markets such as
aerospace, more than doubling Graham’s total addressable
market
- Demonstrated strong annual growth over last 10 years with low
double digit operating margins
- Combined revenue is expected to be over 50% to the defense and
aerospace industries
- Brings backlog of $100 million, primarily in the defense
industry; approximately $40 million of backlog is expected to
convert to revenue in fiscal 2022 and the remainder to convert to
revenue over the following three to four years
- Strong management team with entrepreneurial culture,
engineering leadership and solid pipeline of new products under
development
- Broadens Graham’s engineering expertise with cryogenics,
thermal, fluid and power management solutions, as well as systems
integration capabilities
- Employs available cash and improves balance sheet
efficiency
Terms of the Transaction and Financing
Graham acquired BNI for total consideration of $70.1 million
comprised of approximately $61.1 million in cash and $9.0 million
in equity, or approximately 610 thousand shares at $14.69 per
share. The purchase price is subject to typical working capital
adjustments. The cash consideration was paid using a combination of
$41.1 million of cash on hand and $20.0 million from a new credit
facility. The purchase price represents an 11x twelve-month forward
Adjusted EBITDA multiple. Following the acquisition, Graham’s total
shares outstanding are 10.6 million.
Jeffrey F. Glajch, Graham’s Vice President Finance and Chief
Financial Officer, commented, “After nearly three years of working
with the BNI leadership team, I am pleased we were able to
successfully consummate this acquisition. The strategic rationale
is abundantly clear. Importantly, we anticipate this acquisition,
along with further organic and M&A investment opportunities in
the defense and aerospace markets, will strengthen long term
shareholder returns.”
The stock purchase agreement also includes a contingent earn-out
dependent upon certain post-acquisition financial measures of BNI,
in which the sellers are eligible to receive up to $14 million in
additional cash consideration.
Graham entered into a new five-year, $20 million term loan to
pay a portion of the acquisition purchase price and a $30 million
revolver with a $10 million accordion feature for potential
acquisitions. The interest rate on the term loan is variable based
on levels of borrowings. At the current level, the rate is the
Bloomberg BSBY short-term credit sensitive index plus 1.50%.
Mr. Glajch added, “We put our significant cash reserves to work
with this acquisition with the intent of improving the efficiency
of our balance sheet by adding low-cost debt. This debt supports
our growth and enables greater financial flexibility. We expect
this will drive improved returns on assets and further enhance
shareholder value.”
Management Announcements
The Company also announced today that Daniel J. Thoren, who was
BNI’s Chairman of the Board and served as President and CEO for 24
years, has been appointed as President and COO of Graham
Corporation. Matthew Malone, who had been recently named BNI’s
President & CEO, has been appointed Vice President and General
Manager- Barber-Nichols for Graham Corporation.
Mr. Lines said, “We are thrilled to welcome the BNI team and
value their commitment to continue to advance the business forward.
We are especially pleased to have Dan accept the role as President
and COO of Graham. Dan has a proven track record of strong
leadership, taking BNI from $5 million in revenue to where they are
today. He built an excellent organization, a strong, talented team
and I believe he is well qualified to be a key leader in our now
much larger organization. We expect that Dan will be a key driver
of our strategy to further strengthen our presence in the defense
and aerospace markets.
Daniel J. Thoren, the newly appointed President and Chief
Operating Officer of Graham, commented, “This is a really exciting
time for BNI and we are very enthusiastic about joining the Graham
team. We believe that combined we have more financial strength to
invest in continued growth and a greater opportunity to advance our
technologies into new and extraordinary applications. Importantly,
there are many cultural and process similarities between Graham and
BNI. We are both engineering firms that manufacture complex, high
quality solutions for our customers’ critical applications.
Customer focus and quality are core values of both teams. Together,
I anticipate we become an even more formidable force in our
markets.”
Dan Thoren has served as the President and CEO of Barber-Nichols
since 1997. From 1991 to 1997, he held Senior Engineer and
Engineering management posts at the company. Mr. Thoren earned a
B.S. degree in Mechanical Engineering from the University of
Wyoming and an M.S. in Organizational Management from the
University of Colorado, Denver.
Matt Malone joined BNI in 2015 as a Project Engineer focused on
rocket engine turbopump design and development. He was promoted to
Navy program manager in 2018, overseeing key U.S. Navy programs.
Mr. Malone was appointed Vice President of Operations of BNI in
2020. He began his career at GE Transportation where he held a
variety of engineering and management positions.
Mr. Malone earned his B.S. in Mechanical Engineering with honors
in design optimization from Pennsylvania State University and his
M.S. in Mechanical Engineering from Georgia Institute of
Technology.
About Barber-Nichols, Inc.
BNI designs and builds products and systems for a variety of
U.S. Department of defense customers including the U.S. Navy and
Air Force, NASA, and commercial customers in the aerospace,
medical, computer and automotive industries. This broad range of
industry and customer experience has delivered sustained business
growth through varying economic cycles of the industries served.
BNI provides complicated turbomachinery solutions for critical
applications in the aerospace, defense, cryogenics and energy
industries. The company has had strong growth over the last
20-years from the expansion of its engineering capabilities for
programs that involve complex production and system integration.
Founded in 1966, BNI operates from a leased 96,000 square foot
campus including a new, 43,000 square foot, state-of-the-art
manufacturing facility in Arvada, Colorado where it is
headquartered. More information on BNI can be found on their
website www.barber-nichols.com.
Webcast and Conference Call
Graham’s management will host a conference call and live webcast
today at 11:00 a.m. Eastern Time to review the acquisition in
addition to its fiscal 2021 financial results. A slide presentation
regarding the acquisition can be found Graham’s website at
www.graham-mfg.com under the heading “Investor Relations.” A
question-and-answer session will follow the formal
presentation.
Graham’s conference call can be accessed by calling (201)
689-8560. Alternatively, the webcast can be monitored on Graham’s
website at www.graham-mfg.com under the heading “Investor
Relations.” A telephonic replay will be available from 2:00 p.m. ET
today through Tuesday, June 8, 2021. To listen to the archived
call, dial (412) 317-6671 and enter conference ID number 13718347.
A transcript of the call will be placed on Graham’s website, once
available.
ABOUT GRAHAM CORPORATION
Graham, with its wholly owned subsidiary Barber-Nichols Inc, is
a global business that designs, manufactures and sells critical
equipment for the energy, defense, aerospace, medical, technology,
automotive and chemical/petrochemical industries. Graham and BNI’s
global brands are built upon world-renowned engineering expertise
in vacuum and heat transfer, cryogenics, and turbomachinery
technologies, responsive and flexible service and unsurpassed
quality.
Graham routinely posts news and other important information on
its website, www.graham-mfg.com, where additional comprehensive
information on Graham Corporation and its subsidiaries can be
found.
Safe Harbor Regarding Forward Looking Statements
This news release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as
amended.
Forward-looking statements are subject to risks, uncertainties
and assumptions and are identified by words such as “expects,”
“estimates,” “confidence,” “projects,” “typically,” “outlook,”
“anticipates,” “believes,” “appears,” “continue,” “could,”
“opportunities,” “seeking,” “potential,” “will” “plans,” “aim,”
“pursuit,” “look towards” and other similar words. All statements
addressing operating performance, events, or developments that
Graham Corporation expects or anticipates will occur in the future,
including but not limited to, the integration and operation of BNI,
the accretive impact of the acquisition of BNI, the effect of the
BNI acquisition on our growth, diversification strategy, markets,
returns and solutions, our ability to achieve our operating
priorities, improve efficiencies and increase stockholder value,
our ability to retain and hire key personnel, including as a result
of the BNI acquisition, expected expansion and growth opportunities
within our domestic and international markets, anticipated revenue,
the timing of conversion of backlog to sales, market presence,
profit margins, our ability to improve cost competitiveness and
productivity, customer preferences, changes in market conditions in
the industries in which we operate, our liquidity and capital
requirements, our ability to attract or retain customers, and ,
changes in general economic conditions and customer behavior, , are
forward-looking statements. Because they are forward-looking, they
should be evaluated in light of important risk factors and
uncertainties. These risk factors and uncertainties are more fully
described in Graham Corporation’s Annual Report on Form 10-K and
other reports filed with the Securities and Exchange
Commission.
Should one or more of these risks or uncertainties materialize
or should any of Graham Corporation’s underlying assumptions prove
incorrect, actual results may vary materially from those currently
anticipated. In addition, undue reliance should not be placed on
Graham Corporation’s forward-looking statements. Except as required
by law, Graham Corporation disclaims any obligation to update or
publicly announce any revisions to any of the forward-looking
statements contained in this news release.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210601005317/en/
Jeffrey F. Glajch Vice President – Finance and CFO Phone:
(585) 343-2216 jglajch@graham-mfg.com Deborah K. Pawlowski
Kei Advisors LLC Phone: (716) 843-3908
dpawlowski@keiadvisors.com
Graham (NYSE:GHM)
Historical Stock Chart
From Jul 2024 to Aug 2024
Graham (NYSE:GHM)
Historical Stock Chart
From Aug 2023 to Aug 2024