HEXCEL TO GROW THROUGH FIBERITE ACQUISITION

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Hexcel Corp.'s acquisition of most of the assets of Fiberite Inc. would strengthen Hexcel's presence in space shuttle, public and private space satellite and military aircraft markets.

Hexcel said April 21 that it has reached a definitive agreement to buy selected Fiberite assets and businesses for about $300 million in cash and assumed liabilities. The business lines had sales of about $200 million last year and could push Hexcel to annualized sales of $1.1 billion.

``This transaction has to do with growth and diversification,'' Stephen Forsyth, Hexcel senior vice president and chief financial officer, said in a telephone interview from the structural material maker's Stamford, Conn., headquarters.

For Hexcel, the transaction carries the pre-emptive imprint of John J. Lee, its chairman and chief executive officer and a highly effective deal maker.

Fiberite's parent company, Fiberite Holdings Inc., filed Feb. 21 for an initial public offering of a minority interest, but the IPO stalled in the face of the Hexcel offer. Separately, Cytec Industries Inc. of West Paterson, N.J., had shown recent interest in acquiring Fiberite.

Forsyth characterized two 1996 deals differently than the Fiberite pact. Hexcel bought Hercules Inc.'s composites products division in a ``vertical integration into carbon fiber'' June 27, and Hexcel acquired Ciba-Geigy Ltd.'s composites unit in a ``consolidation-driven'' transaction Feb. 29, 1996. Ciba-Geigy, now known as Ciba Specialty Chemicals Holding Inc. of Basel, Switzerland, owns 49.2 percent of Hexcel.

``The Fiberite acquisition will increase Hexcel's critical mass, making it a global powerhouse,'' said Timothy Gerdeman, specialty chemical analyst with Salomon Bros. in Chicago.

``One must question, however, whether the transaction will clear [Federal Trade Commission] review, given the strategic importance of the aerospace sector to the U.S. economy and the military,'' he said. Also, ``it seems to be a pretty pricey transaction.''

Hexcel is ``getting new market areas with new product applications and also getting new customers,'' said Paul H. Nisbet, aerospace analyst with JSA Research Inc. in Newport, R.I.

Hexcel ``clearly intends to become a premier player but must pay a premium price to get it,'' said research analyst Jeffrey Wiegand with Robotti & Co. in New York. ``The company has a track record of absorbing acquisitions.''

Hexcel plans to acquire certain Fiberite prepreg operations and ablatives, carbon-carbon, molding compound and engineered components businesses. Locations include Tempe, Ariz.; Newark, Del.; Winona, Minn.; Delano, Pa.; Greenville, Texas; and Courelles-les-Lens, France. Hexcel will gain high-temperature thermoplastics and cyanate ester resins and polymer matrix composites for aircraft engine, space shuttle, automotive and electronic applications.

Excluded are Fiberite sites in Orange, Calif., and Ă–stringen, Germany, primarily commercial aerospace operations that would overlap existing Hexcel assets.

``We looked for pieces of greatest interest [and had to decide] how much to pay,'' Hexcel's Forsyth said. Commercial aerospace accounted for 56 percent of Hexcel's 1996 sales; space and defense, 11 percent; and recreation, 10 percent.

Fiberite, based in Tempe, employs 788 and lost almost $10 million on 1996 sales of $218.8 million. On a pro forma basis, Fiberite lost $12.9 million on 1995 sales of $207.3 million. The losses were attributed to extraordinary and nonrecurring charges associated with the stock offering and a change of ownership.

In a heavily leveraged deal, DLJ Merchant Banking Partners L.P. of New York and Carlisle Group L.P. of La Jolla, Calif., acquired the business from units of Imperial Chemical Industries plc on Oct. 6, 1995, for $113.3 million plus costs of $5 million.

A unit of Stamford Capital Group Inc. of Stamford, Conn., agreed April 20 to purchase Fiberite Holdings' outstanding stock. The unit, Stamford FHI Acquisition Corp., would sell most Fiberite assets and business to Hexcel and the operations in California and Germany to others.

``Clearly, DLJ and others purchased Fiberite to build value and resell it,'' James E. Ashton, Fiberite chief executive officer, said in a telephone interview. ``A combination of Stamford Capital and Hexcel has offered a price that the owners deemed attractive.''

Lee restructured Hexcel under Chapter 11 of the U.S. Bankruptcy Code from December 1993 to February 1995, and he orchestrated the Ciba and Hercules deals. Hexcel holds a credit facility with a group of banks led by the Credit Suisse subsidiary of CS Holding of Zurich, Switzerland.

Hexcel employs 5,013 and reported a loss from continuing operations of $19.2 million on 1996 sales of $695.3 million. The result included a $42.4 million charge for business acquisition and consolidation expenses. Excluding these charges and associated tax benefits, the company would have reported net profit of $19.5 million or 58 cents per share.

The Hexcel acquisition of Fiberite is scheduled to close during 1997's third quarter, subject to regulatory approvals.