Forterra Announces Agreement with Thompson Pipe Group

6/26/17

IRVING, Texas, June 26, 2017 (GLOBE NEWSWIRE) -- Forterra, Inc. (Nasdaq:FRTA), a leading manufacturer of water infrastructure pipe and products in the United States and Eastern Canada, today announced it has entered into a definitive agreement to sell the U.S. concrete and steel pressure pipe assets of its Water Pipe and Products business segment to Thompson Pipe Group. The transaction is subject to customary closing conditions and is expected to close in the third quarter of 2017.

Under the terms of the agreement, an affiliate of Thompson Pipe Group will acquire assets related to five Forterra manufacturing facilities and a fittings facility. Forterra will receive approximately $23.2 million in cash, exclusive of fees and expenses, as well as assets relating to a drainage pipe and products manufacturing facility located in Conroe, Texas, which primarily serves the Houston market. The Company intends to use the net proceeds from the transaction to pay down debt. The transaction is expected to be immediately accretive to the Company’s earnings, margins and cash flows.

“After a review of strategic alternatives to enhance shareholder value, we are pleased to reach this agreement with Thompson Pipe Group,” said Jeff Bradley, CEO of Forterra. “We believe this transaction, which includes not only the divestiture of non-core assets, but also the acquisition of a drainage pipe and products facility in the large Houston market, will enable us to sharpen our focus on our core business and high-margin growth opportunities and more efficiently allocate capital to execute our strategic objectives.”

Key Transaction Rationale

  • Expected to be immediately accretive to Forterra’s earnings, margins and cash flows:
    • Eliminates significant working capital requirements associated with contracts with uncertain delivery schedules; and
    • Reduces expected maintenance capital expenditure requirements.

    • Acquisition of Houston-area plant bolsters Forterra’s strategic position in a large and growing market, and will become part of Forterra’s Drainage Pipe and Products business segment.

    • With the asset sale, Forterra will focus on its core drainage and ductile iron pipe product lines with favorable end-market fundamentals:

    • The Company’s U.S. concrete and steel pressure pipe assets have minimal synergies with the remaining core business due to limited customer overlap, separate manufacturing facilities and a different manufacturing process.

    • Exits a business with unfavorable market dynamics in the United States:

    • Long-term projects subject to customer delays can create earnings volatility; and
    • Narrow market segment with significant competition and limited near-term catalysts for improvement in demand.

    Financial Summary

  • The following is a summary of certain financial information for the U.S. Concrete and Steel Pressure Pipe assets to be sold in the transaction:

  • For the year ended December 31, 2016, net sales were $99.7 million, net loss was $1.6 million and Adjusted EBITDA1 was $1.4 million

    • For the quarter ended March 31, 2016 as compared to the quarter ended March 31, 2017, net sales declined from $30.0 million to $27.7 million, net income of $1.0 million declined to a net loss of $6.1 million and Adjusted EBITDA1 of $1.9 million declined to a loss of $5.5 million

  • About Forterra

    Forterra, Inc. (Nasdaq:FRTA) is a leading manufacturer of water and drainage pipe and products in the U.S. and Eastern Canada for a variety of water-related infrastructure applications, including water transmission, distribution, drainage and stormwater management. Based in Irving, Texas, Forterra’s product breadth and scale help make it a one-stop shop for water-related pipe and products, and a preferred supplier to a wide variety of customers, including contractors, distributors and municipalities. For more information on Forterra, visit forterrabp.com.

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