Perth resources technology player Alloy Steel International has been acquired by its Nasdaq-listed minority shareholder in a deal that takes control of the business from the founder's family.
Perth resources technology player Alloy Steel International has been acquired by its Nasdaq-listed minority shareholder in a deal that takes control of the business from the family of its founder, the late Gene Kostecki.
Based in the US industrial city of Cleveland, $10 billion Lincoln Electric Holdings paid $US90 million for remaining 65 per cent stake held by Mr Kostecki's family, including Steven Kostecki who runs the business.
Lincoln Electric bought a 35 per cent stake earlier this year in what is understood to have been the first of a two-stage deal involving similar pricing.
This week’s announced deal puts Alloy Steel’s enterprise value at about $210 million, with the family estimated to be worth about $195 million or more depending on the tax treatment of the proceeds and other arrangements related to the deal.
Alloy Steel was started in the early 1990s by Gene Kostecki who invented the Arcoplate technology which uses metallurgical and engineering technology to reduce wear on steel equipment used in industrial applications such as mining and minerals processing.
The company also provides engineering and asset monitoring services and has products based on fastening, welding technology and ceramic alternatives to steel.
Lincoln Electric claims to be the world’s biggest designer and manufacturer of arc welding and cutting products, manufacturing a broad line of arc welding equipment, consumable welding products and other welding and cutting products.
It has been a supplier to Alloy Steel for some time.
The innovative Malaga-based first started exporting its products to the US in 1993.
According to Alloy Steel, these days Arcoplate is exported to more than 25 countries and has representatives, office locations and distributors in the US, Chile, India, and throughout Australia.
The deal follows the settlement of legal action in the US which resulted from a 2021 deal in which the Kostecki family retook full ownership business for about $20 million, almost 20 years after a minority stake was sold ahead of planned IPO that never proceeded.
The estimated $14.5 million settlement reset the 2021 valuation of Alloy Steel at about $95 million, up from about $55 million when the original deal was struck.
Alloy Steel’s latest annual report shows the business had net assets of almost $73.9 million, up from almost $67 million in the previous year.
The report showed Alloy Steel was largely debt-free but held cash and cash equivalents of $24.6 million, a level consistent with the previous reporting period.
Among the company’s expenses is a sponsorship of Kostecki Brothers Racing.
In its recent second quarter update Lincoln said Alloy Steel has annual revenues of approximately $US50 million and the acquisition was expected to be accretive to the buyer’s earnings, excluding transaction costs, at approximately $US0.13 to $US0.15 per diluted common share on an annual basis.
Lincoln Electric has had interests in Australia since at least 2015 when it acquired Brisbane-based Specialised Welding Products. Loclur Engineering in Gladstone was acquired in April 2018 by SWP.
Lincoln Electric cites operations in the east coast towns of Gladstone and Newcastle in its latest annual report.
SWP claims to be at the forefront of welding and cutting technology.
Law firm Thomson Geer advised the owners of Alloy Steel on the sale of the company to Lincoln Electric.
The Thomson Geer team was led by Perth-based partner Hedley Roost.
"We are pleased to have advised the owners of Alloy Steel on this transformational deal that sees the company become part of a global engineering giant with the opportunity to expand the international reach of its products," the law firm said.
It is understood Steven Kostecki will provide technical consulting services to assist in knowledge transfer of the manufacturing process as part of the sale..
He and his son, Jake Kostecki, also operate a separate business to Alloy Steel called Sprint Materials Processing, a material processing business located in Malaga.
