AK Steel’s agreement to acquire Precision Partners Holding Company for $360 million in cash is “another step forward” in the transformation of the Butler County-based company, the company’s leader told the Journal-News.
Roger Newport, AK Steel’s chief executive officer, on Wednesday said the addition of the Ontario-based company to AK Steel’s portfolio of product capabilities provides “a fully integrated downstream platform” that further strengthens AK Steel’s close collaboration with its automotive Original Equipment Manufacturer (OEM) customers and Tier 1 suppliers.
The acquisition also advances AK Steel’s core focus on product innovation, especially in the high-growth automotive light weighting space and enhances its position in advanced high strength steels, Newport said.
FIRST COVERAGE: AK Steel to purchase automotive company for $360M in cash
“Precision Partners specializes in lightweight, complex and hard-to-manufacture components and they are the ‘go-to’ problem solver in this space, embracing the most challenging and complex components, just as AK Steel focuses on providing high quality carbon, stainless and electrical steel product solutions to its customers,” he said.
Through the acquisition, AK Steel can combine its advanced multi-materials expertise with Precision Partners leading die design, tool manufacturing and hot stamping and cold stamping capabilities to serve the steel company’s core market, Newport said.
Fortune 500 company AK Steel Holding Corp. is headquartered in West Chester Twp. Between operations in West Chester Twp. and its Middletown Works steel plant, AK Steel employs approximately 2,400 full-time workers in Butler County, making it the county’s third-largest employer.
Jaime Vasquez, vice president, finance and chief financial officer, said AK Steel has made “significant progress” improving its balance sheet in the past 18 months and believes it prudent to fund the acquisition with a combination of equity and debt “so that our leverage metrics do not materially change in post-closing.”
“One of the many things that we like about the acquisition is the cash flow generating capabilities of Precision Partners and the relatively low capital requirements,” Vasquez said.
Precision Partners, Newport said, has “a long track record” of serving the automotive market, unique engineering capabilities and an extensive track record of delivering innovative solutions to their customers.
“We believe our combined capabilities and expertise can leverage those strengths,” he said.
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The acquisition of Precision Partners adds to the company’s existing capabilities, positions it well for future growth and is another step in the execution of a strategy AK Steel outlined approximately 18 months ago.
“We have been following the strategic playbook we laid out at that time and this acquisition is another progressive step in our transformation,” he said. “Over this period, we have reviewed a number of opportunities to grow our downstream presence and we firmly believe Precision Partners is the right platform for us to leverage going forward and will serve as a key pillar of our downstream strategy.”
By utilizing Precision Partner’s assets, AK Steel will be able to help facilitate the growth of advanced high strength steels into its combined customer base and foster innovation in the fast-growing hot stamping market, Newport said.
“Our ultimate goal is to provide the best value steel solutions to our customers and we believe this acquisition strengthens that capability and will further differentiate AK Steel,” he said.
The transaction positions AK Steel to be “a full-service solution provider” from the production of advanced high-strength steels to the design and stamping of the most complex parts required in the automotive market, according to Kirk Reich, AK Steel’s president and chief operating officer.
“Not only will we be able to better serve the OEMs, but we will also be able to add value to our other existing automotive market customers along the supply chain through better support and solutions, be they engineering, tooling, advanced materials or stamped products,” Reich said.
Precision Partners offers a comprehensive portfolio of parts to the transportation industry, one that is strategically focused on light truck, SUV and crossover platforms.
“In fact, they’re currently a supplier to 13 of the 15 best-selling vehicles in the United States,” he said. “Additionally, we expect to be able to complete some of the combined technology and material and explore other markets where lightweighting hasn’t yet be introduced such as lawn and garden, agricultural larger trucks, off-road vehicles and others.
Eric Petersen, AK Steel’s vice president, research and innovation, said Precision Partners is founded in its technical roots with a long track record of tool and die manufacturing excellence.
“We view the Precision Partners team as the go-to source for solving customer problems, as they’re a proven technical company employing approximately 300 engineers and skilled toolmakers,” Petersen said. “Like our own researchers and engineers, their expertise extends beyond the shop floor.”
The team has well-developed, lean manufacturing processes to improve product performance, speed up the time from design to production and increase overall efficiency of tool production,” he said.