NEW YORK ( The Deal) -- Japanese carbon fiber producer Toray Industries on Friday, Sept. 27, agreed to buy U.S. rival Zoltek Companies (ZOLT) for $584 million to grab more of the market as demand increases.
Tokyo-based Toray said it would pay $16.75 per share for Zoltek.
Although the deal is a 2% premium to the stock's Wednesday close, it's a 10% discount on the Zoltek's Thursday close following a report of the impending deal.
"As one of its strategically expanding businesses, Toray has promoted business expansion of carbon fiber composite materials business by proactively allocating business resources," the buyer said.Zoltek put itself on the market in April at the behest of major shareholder Quinpario Partners. The fund, which is led by Jeffry Quinn and owns 11% of Zoltek, wanted the company to either sell itself, recapitalize or go shopping. Zoltek responded by tapping JPMorgan Securitiesto consider its options. The acquisition will allow Toray to expand into the market for large tow carbon fibers, which have far more fibers than regular tow products. Toray said it expects the market for large tow carbon fiber to expand about 15% annually as demand for high-performance, low-weight equipment such as wind turbines booms. The market for regular tow is expected to remain flat. Zoltek, based in St. Louis, saw revenue fall by about a third in the third quarter to $30.3 million as demand for wind energy products softened. It slipped to a loss of $900,000 on the weak sales as well as a loss on foreign currencies, compared with profit of $3.3 million in the third quarter of 2012. "This transaction represents a great result for our shareholders, customers and employees. Toray provides unique opportunities to drive the continued growth of our commercial carbon fibers business well into the future," said Zoltek CEO and founder Zsolt Rumy in a statement. Zoltek said its board recommends shareholders accept the agreement. CEO Rumy pledged his 18% stake to the deal, which is expected to close late this year or in early 2014. In addition to JPMorgan, Zoltek turned to Thompson Coburn LLP for counsel. Toray received financial advice from GCA Savvian Advisors and counsel from Skadden, Arps, Slate, Meagher & Flom. Written by Andrew Bulkeley
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV