JPS Industries Inc. has agreed to acquire two Hexcel Corp. reinforcement material operations in the Carolinas for $62.5 million plus a contingency. The deal may close during 2007's third quarter.
JPS will buy Hexcel's fiberglass-based electronics and specialty industrial substrates businesses and its aramid-based ballistics substrates business. The contingency involves an earn-out payment of up to $12.5 million on ballistics products revenues in excess of $70 million per year from the facilities over 36 months. Ballistics sales totaled $96 million for the year ended May 31.
The Hexcel operations are located in Anderson, S.C., and Statesville, N.C. The firm bought the sites as part of a 1998 purchase of Clark-Schwebel Inc.'s industrial fabrics business.
In the JPS transaction, Hexcel said it expects to record an after-tax loss of $2 million-$3 million on the initial cash purchase price excluding potential additional payments. Hexcel will retain liability from a Department of Justice civil investigation of allegedly defective Zylon fabric used in ballistic vests.
On JPS' behalf, a Wachovia Corp. unit plans to finance the acquisition with a $105 million loan.
``This transaction represents a landmark event in the history of JPS Industries,'' said Michael Fulbright, JPS chairman and chief executive officer, in a statement.
Greenville, S.C.-based JPS makes glass substrates for specialty industrial applications and, including the pending acquisition, projects annual sales of more than $325 million.
For Stamford, Conn.-based Hexcel, the JPS deal will conclude a yearlong portfolio realignment that included sales of its European architectural business Feb. 28 and its Anderson-based TechFab joint venture in December. The realignment and the resulting $110 million of gross cash proceeds should allow Hexcel to achieve its lowest debt level in 10 years, Hexcel Chairman and CEO David Berges said in a statement.