Ascent Industries Announces Sale of Specialty Pipe & Tube for $55 Million
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Insights
The divestiture of Specialty Pipe & Tube by Ascent Industries for $55 million in cash is a strategic move that streamlines the company's operations and strengthens its balance sheet. The immediate financial impact is the reduction of outstanding debt, which is likely to improve Ascent's debt-to-equity ratio and potentially its creditworthiness. This could lead to lower borrowing costs and a more favorable lending environment for the company in the future. The deal also injects liquidity into the company, which can be allocated to growth initiatives or further debt reduction.
Investors should note that the transaction may lead to a one-time gain on the sale, which could positively affect the company's next quarterly results. However, they should also consider the potential loss of revenue streams that SPT contributed. The strategic focus on core competencies suggests a shift towards higher margin operations, which could enhance profitability in the long term but might involve short-term adjustment costs.
Ascent's sale of SPT, a distributor of large diameter carbon steel pipe and tubing, reflects a strategic repositioning within the industrials sector. The move away from the cyclical nature of SPT's end-markets indicates Ascent's intention to stabilize its revenue and reduce exposure to market volatility. For industry stakeholders, this suggests a shift towards businesses with more predictable demand patterns.
By narrowing its focus, Ascent could potentially increase operational efficiencies and market share in its remaining segments. The divestiture may also signal consolidation trends within the industrial tubular and specialty chemicals markets, as companies may look to optimize their portfolios for resilience against market fluctuations.
The use of proceeds from the sale to pay down debt is a significant move that will likely resonate with debt market stakeholders. A lower debt burden can lead to improved financial ratios, such as interest coverage and leverage ratios, which are critical for debt investors and rating agencies. This could result in a re-rating of Ascent's debt securities and influence the yield demanded by investors on new issuances.
Additionally, the reduction in complexity of Ascent's operations may lead to more predictable cash flows, which is a positive indicator for debt repayment capacity. Stakeholders in the fixed income space will monitor how the company's debt management strategy evolves post-transaction, including the potential for refinancing existing debt at more favorable terms or the issuance of new debt to fund growth within its focused business segments.
SPT is a leading master distributor for large diameter, hot finish seamless carbon steel pipe and tubing. Proceeds from the transaction will be used to pay down outstanding debt and for general corporate purposes. The sale greatly reduces the complexity associated with Ascent’s tubular operations and allows the Ascent Tubular team to focus on its core competencies that best position the company for long-term growth.
“We are proud of achieving this value-creating outcome for Ascent shareholders. While SPT is a unique and profitable business, the inherent cyclicality in its end-markets makes it a much better fit for the private markets,” said Chris Hutter, president and CEO of Ascent. “This transaction provides Ascent with the ability to dramatically reduce our debt, while providing additional available capital to pursue growth opportunities within our focused businesses under new segment leaders. We are proud of SPT’s performance under our stewardship, specifically in the past three years, and believe SPT is positioned for continued success in the future.”
Ascent’s remaining assets within the tubular segment consist of Bristol Tubular Products, the largest domestic manufacturer of welded pipe from stainless steel and other nickel alloys, and American Stainless Tubing, a producer of premium ornamental stainless steel tubing.
Angle Advisors acted as financial advisor and Sherman and Howard acted as legal advisor to Ascent.
About Ascent Industries Co.
Ascent Industries Co. (Nasdaq: ACNT) is a company that engages in a number of diverse business activities including the production of stainless steel pipe and tubing and the production of specialty chemicals. For more information about Ascent, please visit its website at www.ascentco.com.
Forward-Looking Statements
This press release may include "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and other applicable federal securities laws. All statements that are not historical facts are forward-looking statements. Forward looking statements can be identified through the use of words such as "estimate," "project," "intend," "expect," "believe," "should," "anticipate," "hope," "optimistic," "plan," "outlook," "should," "could," "may" and similar expressions. The forward-looking statements are subject to certain risks and uncertainties which could cause actual results to differ materially from historical results or those anticipated. Readers are cautioned not to place undue reliance on these forward-looking statements and to review the risks as set forth in more detail in Ascent Industries Co.’s Securities and Exchange Commission filings, including our Annual Report on Form 10-K, which filings are available from the SEC or on our website. Ascent Industries Co. assumes no obligation to update any forward-looking information included in this release.
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Company Contact
Bill Steckel
Chief Financial Officer
1-630-884-9181
Investor Relations
Cody Slach and Cody Cree
Gateway Group, Inc.
1-949-574-3860
ACNT@gateway-grp.com
Source: Ascent Industries Co.
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