Spartanburg-based Synalloy Corp. has its eye on a Connecticut firm that could boost the combined company’s revenues to $381 million annually from projected Synalloy revenues of $240 million in 2015, according to a letter from the company’s president and CEO, Craig Bram.
Bram sent a non-binding preliminary letter expressing interest in acquiring Connecticut-based The Eastern Company, which reported net sales of $142 million for 2013, according to its annual report. Founded in 1858, the company manufactures industrial hardware, security products and metal castings from locations in the U.S., Canada, Mexico, Taiwan and China.
“Although there is certainly much to discuss and due diligence to be conducted before we could move forward with a formal letter of intent, I want to propose a potential deal structure that I believe could create substantial value for both Synalloy’s and Eastern’s shareholders,” wrote Bram. “Based on Eastern’s SEC filings, I would place an initial valuation of the company at $119 million, or $19.12 per share.”
The Eastern Company did not respond to requests for comment in time for publishing.
In the past four years, Synalloy has made three acquisitions that totaled $70 million in combined transaction value, including a $31.5 million acquisition of Specialty Pipe & Tube Inc. in November.
Bram detailed a potential deal structure, which would include a purchase plan of 30 to 40 percent cash and 60 to 70 percent Synalloy common stock.
“The combined company would have annual revenue of $381 million and EBITDA of $48 million. Total debt would be $82 million. After making the change to control payments to Eastern executives, cash would total $18 million, resulting in net debt of $64 million,” wrote Bram. “Net income for the new company would total $22.0 million, or $1.65 per share.”
Based in Spartanburg, Synalloy Corp. is a holding company for a diverse group of manufacturing businesses.
