Insteel Industries’ wholly owned subsidiary, Insteel Wire Products, has purchased its South Carolina competitor, Strand-Tech Manufacturing (STM) for $22.5mn.
The acquisition includes accounts receivable, inventories, production equipment and STM’s plant in Summerville that closes at the end of June 2020. Upon closing, production from STM will be transferred to Insteel’s three plants in Gallatin, Tennessee; Houston, Texas; and Sanderson, Florida.
Around 42 employees could be affected, but most will be offered positions at the Insteel’s other locations, as well as assistance in relocating and help with the transition. Insteel expects to recover around $8mn of its original investment by selling the Summerville facility, along with avoiding future capital costs that would normally result from relocating equipment, the company said in a statement.
Insteel will also record a $1.8mn expense for restructuring associated with closure of the Summerville facility.
STM, which makes pre-stressed concrete strand for construction applications reported sales of $29mn for the 2019 fiscal that ended February 2, 2020. Steel material represents 70pc of Insteel’s total product costs and the company’s net sales in 2019 were reported at $456mn. The company is a large manufacturer of steel-wire reinforcing products mostly for infrastructure projects.
The company indicated that merging the facilities will make its competitive position stronger by improving operating costs and market presence.
The transaction, which was was funded from cash on hand, is subject to certain adjustments after closing.