American Industrial Partners to buy Australia's Moly-Cop for $1.2b

Arrium, which was spun-off from BHP Billiton in 2000, entered voluntary administration in April with outstanding debts of around A$2.8 billion ($2.1 billion). Before the global financial crisis it achieved a market capitalization of close to A$7 billion. KordaMentha, the administrator, agreed the sale of Moly-Cop on behalf of creditors. It followed a dual track process that considered IPO and trade sale options.

Moly-Cop produces forged steel grinding materials used in the processing of copper, gold and other minerals, primarily serving customers in North and South America and Australasia. It is the largest supplier in this segment globally by production capacity. Arrium's mining consumables division also includes a railway wheels and forge business that manufactures rail wheels, axles and wheel sets.

For the 2016 financial year, the company reported sales of $1.02 billion and EBITDA of $156 million. This compares to sales and EBITDA of A$1.59 billion and A$210.5 million, respectively, in 2015.

Arrium as a whole generated sales of A$6.1 billion in 2015, down from A$7 billion the previous year, while EBITDA dropped to A$350.9 million from A$864.2 million. Substantial impairment costs saw the company swing from a net profit of A$205.4 million in 2014 to a loss of A$1.92 billion last year. Arrium's other businesses are steel - it is Australia's leading steel distributor and reinforcing steel supplier - and mining, principally iron ore.

"Moly-Cop is a world-class company and the innovator in its industry. We are strong advocates of the operating strategies that have been implemented by Moly-Cop management and we intend to continue to invest in the business and its growth, further building upon Moly-Cop's leadership position in its industry," said Richard Hoffman, a partner at AIP, in a statement.

Founded in 1989, the US-based private equity firm makes control investments in industrial businesses serving domestic and global markets, targeting businesses with revenues of between $200 million and over $1 billion. It currently has $3.2 billion in assets under management and has completed more than 65 transactions since inception.

Several private equity firms have invested in Australia's mining sector over the past three years as companies face mounting financial pressures during the commodities down cycle. Centerbridge Partners supported a restructuring of Boart Longyear, Apollo Global bought into Leighton Holdings' maintenance services business, The Blackstone Group acquired Orica's chemicals division, and most recently Resource Capital Funds agreed to buy Ausenco.

There have also been failed deals. Several private equity firms made offers for Bradken before Hitachi Construction Machinery succeeded with a buyout offer, while a proposed recapitalization of Arrium led by Blackstone's GSO division was opposed by creditors.

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• Topics
• Australasia
• Buyouts
• Industrials
• Australia
• Commodities
• manufacturing