NN, Inc., a diversified industrial company, announced a definitive agreement under which NN, Inc.’s Life Sciences division will be purchased by affiliates of American Securities LLC for the purpose of being combined with its portfolio company, MW Industries.
MW is a provider of highly engineered springs, specialty fasteners, and other precision components.
“Our businesses all have unique characteristics with opportunities to deliver innovative technology and engineered solutions to our customers in attractive and diverse end markets,” said Warren Veltman, president and CEO. “This is a pivotal moment for NN as the sale of Life Sciences provides us with a clear, expedient and certain path to obtain the necessary capital to significantly reduce our debt and continue to execute on our Power Solutions and Mobile Solutions businesses where we see strong potential to grow and generate value for our shareholders.”
Under the terms of the transaction, the Life Sciences division will be purchased for $825 million, including $755 million (subject to customary adjustments) in cash payable at closing of the transaction and an additional $70 million earnout payable in cash based on the 2022 performance of the Life Sciences division.
The transaction is expected to be completed in the fourth quarter of 2020, subject to customary closing conditions. Following the close of the transaction, the Life Sciences division will combine with MW Industries.
NN plans to use the estimated $700 million in net proceeds from the sale to further pay down its debt and strengthen its balance sheet, providing the company with greater ability to continue to navigate the macroeconomic and business challenges related to COVID-19. NN expects to reduce its net leverage from approximately 6.1x to approximately 1.8x post transaction close, reflecting a pro forma debt to capital ratio of approximately 35%, down from 75%.
The sale of Life Sciences furthers NN’s efforts to strengthen its balance sheet and create greater financial flexibility in order to drive improved performance and enhance shareholder value over the long term. It follows a comprehensive review of NN’s businesses initiated by the company in November 2019, whereby NN evaluated a broad range of operational, financial and strategic alternatives to reduce leverage and enhance shareholder value.
These options included further cost savings and cash generation initiatives, capital allocation opportunities, and the sale of NN, Inc. or one or more of its businesses.
“The Board appointed new leadership about a year ago to help guide the company through an extensive strategic evaluation of our business, a process that began late last year,” said Veltman. “While the COVID-19 global pandemic created challenges during the process, we are confident that after a comprehensive review process, this transaction offers the right partner for Life Sciences and fair value for the business. The combination with MW Industries will help Life Sciences accelerate growth and innovation across global markets, and position the business for long-term value creation and success to the benefit of all its stakeholders.”
Following the sale of Life Sciences, NN will be a diversified industrial platform with a growth trajectory of approximately $600 million in annual sales over the next five years.