Insteel Industries, Inc. (NasdaqGS: IIIN) today announced that its wholly-owned subsidiary, Insteel Wire Products Company, has acquired substantially all of the assets of Strand-Tech Manufacturing, Inc. for $22.5 million, subject to certain post-closing adjustments.
STM is a leading manufacturer of prestressed concrete strand ("PC strand") for concrete construction applications. For the twelve months ended February 2, 2020, STM's sales were $29.0 million.
Under the terms of the purchase agreement, Insteel acquired, among other assets, STM's accounts receivable, inventories, production equipment and facility located in Summerville, South Carolina. The purchase price is subject to an adjustment to be determined based on STM's closing working capital balance. The transaction was funded from cash on hand.
Insteel plans to close the Summerville facility and move most of its equipment to the Company's other three PC strand production facilities located in Gallatin, Tennessee; Houston, Texas; and Sanderson, Florida. Insteel expects to recover approximately $8.0 million of its initial investment in STM through the sale of the facility and the avoidance of future capital outlays resulting from the redeployment of the equipment.
The consolidation of facilities is expected to result in the elimination of up to 42 positions at the Summerville facility. Summerville employees will be offered employment at Insteel's other facilities, together with relocation and transition assistance. It is anticipated that operations at the Summerville facility will cease by the end of the third quarter of fiscal 2020. Insteel expects to record a restructuring charge of approximately $1.8 million in connection with the closure of the facility.
"The STM acquisition represents a significant milestone for our PC strand business," commented H.O. Woltz III, Insteel president and chief executive officer. "We believe the consolidation of facilities will strengthen our competitive position by leveraging our operating costs and optimizing our manufacturing footprint.
"Our decision to close the Summerville facility reflects the harsh market conditions created by the surge in low-priced PC strand import competition following the imposition of the Section 232 tariff on hot-rolled steel wire rod, Insteel's primary raw material. We are continuing to work with the Administration to address the unfavorable impact of the increased imports on U.S. manufacturers. We are committed to making the transition as smooth as possible for the STM employees who are impacted by the plant closure and hope to welcome many of them to Insteel facilities."
About Insteel
Insteel is the nation's largest manufacturer of steel wire reinforcing products for concrete construction applications. Insteel manufactures and markets PC strand and welded wire reinforcement, including engineered structural mesh ("ESM"), concrete pipe reinforcement and standard welded wire reinforcement. Insteel's products are sold primarily to manufacturers of concrete products that are used in nonresidential construction. Headquartered in Mount Airy, North Carolina, Insteel operates eleven manufacturing facilities located in the United States.
