AZZ Inc. Reaches Definitive Agreement to Divest Majority Stake in Company’s Infrastructure Solutions Segment

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advance AZZ’s previously announced strategic asset review; Establishes a 60%-40% joint venture to be controlled by Fernweh Group LLC; Approximate product of $228 million; Promotes the transformation of the company into a Pure Play metal coatings company

FORT WORTH, TX, June 23, 2022 /PRNewswire/ — AZZ Inc. (“AZZ” or the “Company”) (NYSE: AZZ), and Fernweh Group LLC (“Fernweh”)jointly announced today that they have entered into a definitive agreement whereby AZZ will bring its AZZ Infrastructure Solutions segment1 (“AIS”) to AIS Investment Holdings LLC (the “AIS Joint Venture”), and sell a 60% interest in the AIS Joint Venture to Fernweh at an implied enterprise value of AIS of $300 million. The valuation represents approximately 8.1x AIS LTM 02/28/2022 Adjusted EBITDA2 of about $37 million and is expected to generate cash proceeds for AZZ of approximately $228 million, subject to certain customary purchase price adjustments. Under the terms of the transaction, the AIS joint venture will be led by a board of directors comprised of three representatives from Fernweh and two representatives from AZZ. Following the closing of the transaction, Fernweh will own 60% of the AIS joint venture and AZZ will own 40%. The transaction is expected to close before the end of 2022, subject to receipt of required government approvals and other customary closing conditions and approvals.

AIS is a leading provider of specialty products and solutions designed to support industrial and electrical applications. AIS’ product offerings include custom switchgear, electrical enclosures, medium and high voltage bus conduit, and explosion-proof and hazardous lighting. In addition, AIS is focused on extending the life cycle of the power generation, refining and industrial infrastructure markets, through automated weld overlay solutions for corrosion and corrosion mitigation. erosion. The AIS business has approximately 1,323 employees and operates through a global network of 20 strategically located manufacturing plants. For the 2022 financial year, ended February 28, 2022AIS generated sales of approximately $375 million.

Concurrent with the disposal of a controlling interest in AIS and in accordance with generally accepted accounting principles, the Company is required to value AIS at the lower of its carrying amount or its fair value less costs to sell. The Company will complete this assessment during the second quarter of fiscal 2023. The result of this assessment will be recorded as discontinued operations in the Company’s financial statements and, going forward, it is expected that the continued investment in AIS will be deconsolidated from the Company’s financial statements and accounted for using the equity method.

Tom FergusonChairman and CEO of AZZ, said, “The agreement to transfer a majority stake in AIS to Fernweh represents AZZ’s continued transition to a leading provider of metal coating and galvanizing solutions. While this transaction provides AZZ with near-term liquidity, more importantly, it also provides us with the opportunity to participate in AIS’s value creation journey as it strengthens its position in an attractive market for its products and specialized services. I am confident that Fernweh’s management capability, operational and strategic transformation support and capital provide the necessary resources as catalysts for AIS’s continued growth and expansion after a solid year of bookings growth and backlog I would like to thank the dedicated management team and employees of AIS for their many years of contribution to AZZ and wish them continued success as we enter into this joint venture agreement together.”

“We are excited about the opportunity to acquire a majority stake in AIS and look forward to working with management to continue to strengthen and grow the business. The company has a range of strategic growth opportunities in energy, infrastructure, data center and other sectors, as well as unique capabilities to support marquee customers in these end markets. The acquisition aligns with Fernweh’s investment thesis in the sector industry and will provide a strategic platform on which to build a major electrical and industrial business. We look forward to welcoming fellow AIS from the Fernweh family and establishing a long and successful partnership with Tom and the AZZ team,” said Nick Santhanam, CEO of Fernweh Group.

About AZZ Inc.

AZZ Inc. is a global provider of electroplating solutions and a variety of metal coating solutions, coil coating solutions, welding solutions, specialty electrical equipment and highly technical services for a wide range of markets , including but not limited to power generation, transmission, distribution, refining and industrial markets. AZZ’s Metal Coatings segment is a leading provider of metal finishing solutions for corrosion protection, including hot-dip galvanizing, hot-dip galvanizing, powder coating, anodizing and electroplating. plating, for the North American steel fabrication industry. AZZ’s Precoat Metals segment is a leading provider of aesthetic coatings and corrosion protection to the North American steel and aluminum coil market. AZZ’s Infrastructure Solutions (AIS) segment is dedicated to providing safe and reliable transmission of electricity from generation sources to end customers, as well as automated weld capping solutions for the mitigation of corrosion and erosion of critical infrastructure in energy and waste management markets worldwide.

About Fernweh Group LLC

Fernweh is a principal investment firm launched by leaders of global institutions, who have extensive prior experience working with companies in the industrial and industrial technology sectors on strategy, mergers and acquisitions and operational transformation. Fernweh believes that companies in the mid-cap and small-cap industrial and industrial technology sectors are the engine of the economy. By tailoring cutting-edge management capabilities, operational and strategic transformation support and capital to each company’s unique context, history and needs, Fernweh aims to be a business builder and create value. for all stakeholders.

Non-GAAP Financial Measures

Some of the financial information and data contained in this press release, such as Adjusted EBITDA, has not been prepared in accordance with generally accepted accounting principles in United States (“GAAP”). The Company’s management believes that the presentation of these non-GAAP financial measures provides investors with a more transparent comparison of the results of operations of a wide variety of companies, allowing for a more complete understanding of financial performance, the Company’s competitive position and future prospects. . Management also believes that investors routinely rely on non-GAAP financial measures, such as Adjusted EBITDA, to assess operating performance and that such measures may highlight trends in the Company’s business that could otherwise not be apparent when based on financial measures calculated in accordance with GAAP. .

Although the Company believes that these non-GAAP measures are useful in evaluating the Company’s performance, this information should be considered supplemental in nature and not a substitute for or superior to related financial information prepared in accordance with GAAP. Additionally, these non-GAAP financial measures may differ from similar measures presented by other companies.

Safe Harbor Statement

Certain statements below regarding our expectations of future events or results constitute forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by terminology such as “may” , “should,” “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, “continues” or the negative form of these terms or any other terminology comparable. These forward-looking statements are based on currently available competitive, financial and economic data and management’s beliefs and assumptions regarding future events. These forward-looking statements are inherently uncertain and investors should recognize that actual results may differ from those expressed or implied by the forward-looking statements. Certain factors could affect the outcome of the matters described herein. This press release may contain forward-looking statements that involve risks and uncertainties, including, but not limited to, changes in customer demand for our products and services, including demand from production markets. markets, electricity transmission and distribution markets, industrial markets and metal coatings markets. Additionally, within each of the markets we serve, our customers and operations could potentially continue to be impacted by the ongoing COVID-19 pandemic, including government-issued mandates in this regard. We may also experience additional cost increases for labor, components and raw materials, including zinc and natural gas, which are used in our hot-dip galvanizing process; supply chain vendor delays; customer requested delays for our products or services; delays in additional acquisition or divestiture opportunities; exchange rate; the availability of experienced management and employees to execute AZZ’s growth strategy; a decline in market conditions in any industry related to the products we stock or sell or the services we provide; economic volatility or changes in political stability United States and other foreign markets in which we operate; acts of war or terrorism within United States or abroad; and other changes in economic and financial conditions. AZZ provided additional information regarding risks associated with the business in AZZ’s Annual Report on Form 10-K for the fiscal year ended February 28, 2022 and other documents filed with the Securities and Exchange Commission (“SEC”), available for inspection on AZZ’s website at www.azz.com and on the SEC website at www.sec.gov. You are urged to carefully consider these factors when evaluating the forward-looking statements contained herein and you are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. These statements are based on information as of the date hereof, and AZZ undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

1 Excludes AZZ Crowley hits
2 See press release and presentation of the results of the April 22, 2022 for a reconciliation of non-GAAP adjusted earnings measures for fiscal year 2022

SOURCE AZZ inc.

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