Asahi Tec Acquires Metaldyne

Asahi Tec Corp. (Japan) has signed an agreement to acquire deeply troubled Metaldyne Inc. (USA) in a deal valued at USD $1.2 billion.

Based in Plymouth, Michigan, Metaldyne manufactures engine, driveline and chassis components, primarily for North American automakers. In particular, it supplies rear suspension systems, ball joints, and pumps. The company has 45 plants across 14 countries, employing more than 6,500 people.

Metaldyne is owned by a consortium of private investment banking entities, led by Heartland Partners and CSFB Private Equity. The company was founded in 2001 via the Heartland-financed merger of MascoTech Inc., Simpson Industries, Global Metal Technologies, and Torque Traction Manufacturing.

Making the acquisition, Asahi hopes to push Metaldyne's customer base beyond North America and into Japan and Asia. Currently, only 7% of Metaldyne sales originate from Asia.

Metaldyne will become an Asahi subsidiary, keeping its Michigan-based operations intact, while Asahi maintains its Asian operations in Japan, Thailand and China. Metaldyne has plants in the U.S., Europe, Korea and China.

Asahi, however, is itself no longer an Asian-owned supplier. A 63% majority ownership is held by U.S. investment firm Ripplewood Holdings LLC.

In the acquisition, Metaldyne shareholders will receive USD $2.18 per share, or $215 million in a, "cash-out merger". The remainder of the $1.2 billion will be spent restructuring Metaldyne's large, junk-rated debt load.

In its most recent quarter, Metaldyne sales were flat at $500 million, but the company reversed profit in 2005 to a $17 million loss in 2006. Overall, Metaldyne sales have fallen by 20% since it was founded in 2001. It lost $262 million last year on sales of just over $2.3 billion.

A sign of just how weakened Metaldyne had become: by sales and operations, Metaldyne is four times larger than Asahi, which employs just 3,500. Yet until Asahi came along, Metaldyne's future was cloudy, its considerable debt load languishing seven levels below investment grade.

Metaldyne CEO, Timothy Leuliette, said: "After the transaction, both companies will be well positioned to benefit from growth in emerging markets in Asia as well as the success of transplants in North America and Europe."

Despite the company's poor performance, Metaldyne executives will reportedly all stay on and assume senior positions at Asahi Tec.

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