Precision Castparts Corp. (PCP) intends to acquire RathGibson, LLC, manufacturer of precision thin-wall, nickel-alloy and stainless steel welded and seamless tubing, specializing primarily in the length, wall thickness and diameter.
The company’s products are primarily used in a number of oil & gas, chemical/petrochemical processing companies power generation applications, as well as in other commercial markets. Currently, the company has three facilities in Janesville, Wisconsin; North Branch, New Jersey; and Clarksville, Arkansas[1].
With the acquisition of RathGibson, Precision Castparts will not only expand its presence in the oil & gas market but will also be able to capture strong market prospects in other markets as well. RathGibson’s expertise in tubing is believed to be a strategic fit to Precision’s existing product line which is primarily supplied to the high-end requirements of companies in the oil & gas market.
The acquisition is expected to be immediately accretive to earnings and is expected to be completed by the first quarter of 2013, subject to regulatory approvals. The deal is expected to be an all-cash transaction and will be treated as acquisition of assets for tax purpose. RathGibson’s operations will be included in Precision’s Forged Products segment.
The acquisition of RathGibson comes in at an opportune time as Precision expects its Industrial Gas turbine and seamless well casing pipe market to be one of the primary earnings driver for the for the next couple of years or even beyond. In the latest reported quarter, the company’s forged segment performed well with good revenue and operating profit growth; and this acquisition is expected to improve its performance further.
Precision Castparts Corp. is a manufacturer of complex metal components and products provides high-quality investment castings, forgings and fasteners/fastener systems for critical aerospace and industrial gas turbine (IGT) applications. The company currently has a Zacks Rank #3 which implies a short term (1-3 months) Hold rating on the stock.
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