Diversified Industrials Q3 2022

Industry Trends

Mining Acquisitions on the Horizon

Mining companies are making acquisitions to prepare for the shift to green energy. On October 20th, BHP Group proposed a $339 million offer to acquire Canadian nickel manufacturer Noront Resources. The proposal follows BHP’s $5.8 billion takeover offer to acquire copper mining company O.Z. Minerals Ltd back in August. Global legislation demanding emission cuts and green-energy transitions have fueled considerable acquisition interest in miners of key battery metals.¹

U.S. Gas Prices Drop, For Now

The average U.S. gas price per gallon was $3.83 as of late September 2022, following 14 weeks of falling prices from its peak of $5.11 in June 2022. In response to falling crude oil prices, OPEC+ plans to cut oil production by 2 million barrels daily. The U.S. administration continues to release oil from its Strategic Petroleum Reserve to help lower costs. Gas prices still average 49.3 cents per gallon, higher than in September 2021.^{2 3}

U.S. Manufacturing Activity Falling

The Institute of Supply Management reported that its manufacturing PMI had fallen to 50.9 in September 2022, its lowest reading since May 2020. Rising interest rates are expected to have slowed purchases of appliances, furniture, and other large household goods. Inflation has also contributed to the cooling demand for goods. Machinery, Transportation Equipment, Food, Beverage & Tobacco, and Computer & Electronic products still registered moderate-to-strong growth in September.⁴

Climate Treaty Amendment Would Boost U.S. Chemical Exports

The U.S. Senate voted in September to ratify an amendment to the Montreal Protocol Treaty of 1987. This industry-backed climate treaty would decrease the production of hydrofluorocarbons commonly used in air conditioners and household appliances. U.S. chemical manufacturers have spent billions developing alternative refrigerants that are less harmful to the environment and have higher demand in overseas markets. The amendment would help transition their sales to these products, increasing U.S. exports by $5 billion.⁵

Metal Executives Less Optimistic About Market Rebound

As rising inflation and supply chain struggles persist, steel and aluminum prices have fallen by 45% and 18% in 2022, respectively. U.S. Steel forecasts their Q3 earnings will be 10% lower than Wall Street estimates, Nucor Corp warned of steel shipment totals being reduced in Q3, and Alcoa has warned investors of a drop in earnings. The companies reference high costs of raw materials, energy prices, and reduced demand as reasons for their eroding earnings.⁶

Largest Transactions Closed

Target
Buyer
Value($mm)

Welbilt, Inc.
Ali Group S.r.l.
$4,933.19
Meritor, Inc.
Cummins Inc.
$3,808.37
Neenah, Inc.
Mativ Holdings, Inc.
$1,193.25
The Burke Porter Group of brands
AEA Investors LP
$1,100.00
Coastal Plywood Company
Boise Cascade Wood Products, L.L.C.
$512.00
Gulf Tanks Holdings, Inc.
Kinderhook Industries, LLC
$323.00
Bevcorp LLC
John Bean Technologies Corporation
$290.00
UI Acquisition Holding Co.
Delta International Holding Limited
$92.52
RoboVent, Inc.
Nederman Holding AB (publ)
$41.99
MFT-CKF, Inc.
CKF Inc.
$32.00

Other Financial Buyer Transactions Closed

Target
Buyer
Value($mm)

The Southern Co., Inc.
Rosewood Private Investments
n/a
Proctor Sales Inc.
AH Equity Investments
n/a
Component Sourcing International, LLC
CPC Management LLC
n/a
Rapid Pump & Meter Service Co., Inc.
Hidden Harbor Capital Partners, LLC
n/a

Other Strategic Buyer Transactions Closed

Target
Buyer
Value($mm)

Southern Fasteners & Supply, LLC
Park-Ohio Holdings Corp.
$19.00
Smith Engineering, Inc.
Evoqua Water Technologies Corp.
$18.90
Assets of Calvert Company, Inc.
Western Forest Products Inc.
$12.00
Plastic Industries, Inc.
Altium Packaging, LLC
$5.00
All of the business and operating assets of FormTex Plastics Corporation
good natured Products Inc.
$4.80
Assets of Lion Truck Body
GreenPower Motor Company Inc.
$1.69
Enviro Technologies U.S., Inc.
Enviro Technologies U.S., Inc.
$1.52
Assets of Magnetic Lifting Technologies US
Crane 1 Services Inc.
n/a

Served as advisor to Burkhalter Rigging on their growth capital raise

Served as advisor to W.W. Grainger, Inc. on their acquisition of Imperial

Served as advisor to Hisco, Inc. on their acquisition of All-Spec

Served as advisor to Kreuger International as they became 100% ESOP owned

Served as advisor to National Oak Distributors on their capital raise for ESOP purposes

Served as advisor to Zak Incorporated on their acquisition by LAI International and RLJ Equity Partners

Served as advisor to Crane Rental Corporation in their recapitalization by Hammond Kennedy Whitney

Data Assumptions

This report represents transaction activity as mergers & acquisitions, consolidations, restructurings and spin-offs. Targets are defined as U.S. Based companies with either foreign or U.S. based buyers. Transaction information provided is based on closed dates only.

Glossary

EBIT - Earnings Before Interest and Taxes
EBITDA - Earnings Before Interest, Taxes, Depreciation, Amortization
LTM - Last Twelve Months
TEV - Total Enterprise Value

Sources:

Mandavia, M. “BHP’s O.Z. Bid Could Signal a New Dawn for Mining M&A.” Wall Street Journal, 9 August, 2022.
Geiger, J. “U.S. Gasoline Prices Break Losing Streak.” OilPrice.com, 26 September, 2022.
Faucon, B. “OPEC+ to Weigh Production Cut to Bolster Oil Prices.” Wall Street Journal, 2 October, 2022.
Mutikani, L. “U.S. Manufacturing Activity Slowest in Almost 2 – ½ Years in September - ISM.” Reuters, 3 October, 2022.
Ferek, K. “Senate Approves Climate Treaty Amendment Cutting HFCs in Air Conditioners.” Wall Street Journal, 21 September, 2022.
Deaux, J. “US Steel Says Accelerating Headwinds Eroding Metal Demand.” Bloomberg, 15 September, 2022.

Diversified Industrials Q3 2022

Industry Trends

Mining Acquisitions on the Horizon

U.S. Gas Prices Drop, For Now

U.S. Manufacturing Activity Falling

Climate Treaty Amendment Would Boost U.S. Chemical Exports

Metal Executives Less Optimistic About Market Rebound

Largest Transactions Closed

Other Financial Buyer Transactions Closed

Other Strategic Buyer Transactions Closed

PCE Transactions

Contacts

Michael Poole

Michael Rosendahl

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Diversified Industrials Q3 2022

Industry Trends

Mining Acquisitions on the Horizon

U.S. Gas Prices Drop, For Now

U.S. Manufacturing Activity Falling

Climate Treaty Amendment Would Boost U.S. Chemical Exports

Metal Executives Less Optimistic About Market Rebound

Largest Transactions Closed

Other Financial Buyer Transactions Closed

Other Strategic Buyer Transactions Closed

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PCE Transactions

Contacts

Michael Poole

Michael Rosendahl

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