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Harsco To Sell Infrastructure Business Into Joint Venture With Clayton, Dubilier & Rice; Joint Venture To Combine Infrastructure With Brand Energy To Form New $3 Billion Company

Stocks in this article: HSC

Harsco to Receive $300 Million in Cash And 29 Percent Equity Stake in Combined Enterprise

Harsco to Host Conference Call at 10:30 a.m. Eastern Time Today to Discuss Transaction

CAMP HILL, Pa., Sept. 16, 2013 (GLOBE NEWSWIRE) -- Diversified global industrial company Harsco Corporation (NYSE:HSC) today announced an agreement to sell Harsco's Infrastructure division into a joint venture with Clayton, Dubilier & Rice ("CD&R") under a transaction that will combine the Infrastructure division with Brand Energy & Infrastructure Services, Inc. ("Brand"), which CD&R is simultaneously acquiring from First Reserve. The combined company, which will continue under the name Brand Energy & Infrastructure Services, will be a leading, single-source provider of specialized industrial services to the worldwide energy and infrastructure sectors. Upon closing of the transaction, Harsco will receive cash proceeds of approximately $300 million and a 29 percent equity stake in the combined company, which has an enterprise value of approximately $2.5 billion.

"This transaction is the first major step in the strategic transformation of Harsco," said Patrick Decker, Harsco President and Chief Executive Officer. "It follows a period of extensive consideration and offers a number of compelling benefits to our shareholders. First, it immediately strengthens the financial profile of the Company while providing the financial flexibility to pursue higher return, higher growth opportunities. Second, it reduces the complexity of our business, consistent with our objectives for internal simplification and greater operating efficiency. Third, by maintaining an equity position in a stronger and more profitable combined business, Harsco stands to benefit from the additional value that will be created by the new venture."

Transaction Benefits to Harsco

•   Strengthens Harsco's financial profile. Immediately upon the close of the transaction, Harsco will receive approximately $300 million in cash, which will significantly strengthen the Company's balance sheet and enable the Company to reallocate capital to higher-return opportunities. On a pro forma basis, Harsco expects the transaction to improve margins, be immediately accretive to earnings in the first year after close and improve the Company's return on capital.

•   Positions Harsco to pursue opportunities with attractive return and growth profiles. Harsco believes there are a number of organic growth and bolt-on acquisition opportunities to create differential value and generate improved returns and growth.

•   Reduces the complexity of the Harsco portfolio.  This transaction is aligned with Harsco's stated objectives to generate more attractive returns and improve the underlying performance of its businesses, particularly its Metals & Minerals segment. Under its ongoing Simplification initiative, Harsco is streamlining its operational structure and processes to improve internal execution and efficiency. Going forward, Harsco expects to reduce its overhead cost profile commensurate with its reduced complexity and simplified structure.

•   Creates the opportunity for additional value creation. Harsco will benefit from its equity position in a stronger and larger business with a more diversified portfolio of services and offerings. 

The New Brand Energy & Infrastructure Services

Pro forma 2013 annual revenues for the combined company are estimated at nearly $3 billion and EBITDA margin is expected to be in the low double digits. Approximately two-thirds of the combined company's revenues are expected to be generated from the energy sector, with a significant level of recurring revenue driven by required maintenance work. 

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