Aperam S.A. (APAM) Earnings Call Transcript

Good day, and thank you for standing by. Welcome to the Universal Stainless Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to June Filingeri. Please go ahead.

All right. Thank you. Good morning. This is June Filingeri of Comm-Partners, and I also would like to welcome you to the Universal Stainless conference call and webcast. With us from management today are Chris Zimmer, President and Chief Executive Officer; and John Arminas, Vice President and General Counsel. Before I turn the call over to management, let me quickly review procedures. After management has made formal remarks, we will have a brief Q&A session. The conference operator will review procedures for asking a question at that time. As always, I must remind you that the comments made today may contain forward-looking statements. These statements are not guarantees of future performance and involve risks, assumptions and uncertainties that may cause actual results to be materially different from those indicated or anticipated by these forward-looking statements. We encourage you to read the press release issued today, the proxy materials to be sent to Universal stockholders in connection with the transaction, and Universal's other filings with the SEC for a discussion of the risks that can affect the transaction between Universal and Aperam and Universal's business. Universal does not assume any obligation nor does it intend to publicly update or revise any forward-looking statements, whether as a result of new information, change, circumstance or unanticipated events, except as may be required by law. This conference call is for informational purposes only and shall not constitute the solicitation of any proxy concerning the proposed business combination or otherwise, proxies may only be solicited by means of the proxy materials to be provided to Universal stockholders in connection with the transaction. Please refer to the press release for our complete safe harbor statement. With these formalities complete, I would now like to turn the call over to Chris Zimmer. Chris, we are ready to begin.

Thank you, June. Good morning, and thank you for joining us. We've reached a major milestone in the 30-year history of Universal Stainless. I'm very pleased to report that we signed a definitive agreement to be acquired by Aperam, a global leader in stainless specialty steel solutions and recycling with complementary capabilities and strong financial resources. Headquartered in Luxembourg, Aperam has production facilities in Belgium, France and Brazil. Universal will be Aperam's first manufacturing operation in the U.S. Their business is organized in 3 primary operating segments: stainless and electrical steel, services and solution and alloys and specialties. Our products are complementary and do not overlap. Under the terms of the agreement, Aperam will acquire all of the outstanding shares of Universal Stainless for $45 per share in cash, which represents a premium of about 19% to our 3-month volume weighted average share price, and is a 10.6x trailing 12-month adjusted EBITDA as of June 30, 2024. The transaction is expected to close in the first quarter of 2025. This agreement comes after a 6-month effort to identify a range of strategic options to accelerate our growth momentum beyond what we've already accomplished in the past 5 consecutive quarters of growth. During this thorough and exhaustive process, our investment bank, TD Cowen, contacted a substantial number of potential strategic and financial partners, with many of them sent confidential investment memoranda. The Board believes that this transaction was superior to all other alternatives for all Universal stakeholders. The opportunity to join Aperam meets all requirements on our priority list. First, since it's an all-cash transaction, it will deliver liquidity and a premium return to our shareholders on their investment in Universal. Second, it benefits our employees. Our team will remain intact. They will be the part of a fast-growing company with access to larger, more diversified markets beyond the U.S., including Europe, Asia and other regions. Their career opportunities will broaden as they work with international teams and new customer bases. Our team has proudly built the company we are today, and we will retain our identity as Universal Stainless as well as our autonomy and our culture. Third, our customers will benefit as Universal Stainless benefits from the synergies to be achieved in collaboration with Aperam enabling us to further drive operational excellence. Aperam is committed to providing capital and supporting all of our current businesses while investing in manufacturing and technologies that will enable us to become more efficient, add products to our portfolio and better serve our customers. Fourth, our communities will benefit as our accelerated growth leads to job creation, including union jobs. Becoming part of Aperam is a unique and timely opportunity to accelerate our growth trajectory and take it to a whole new level. We're moving forward to capture this opportunity now. I joined with Aperam's CEO, Tim Di Maulo, to say that today marks an exciting milestone for both of our companies. We look forward to joining forces with Aperam to the mutual benefit of our shareholders, our employees, our customers and our communities. That concludes my comments this morning. We'll have time for a brief question-and-answer session now, as I will be meeting with all Universal employees over the next couple of days. Operator, we're ready to take questions.

[Operator Instructions] And our first question will be coming from Philip Gibbs of KeyBanc Capital Markets.

Congratulations. Yes, first question is essentially, you mentioned that you've been looking at potential options or alternatives to grow this business for the last several months. Guess, why did you come to the conclusion that this was the best offer as you sort of perused what was out there in this process?

Yes. So you're right. I think to reiterate what you were saying there. This has been an extremely exhaustive and thorough process that's covered really the better part of the year. This was an initiative that was launched at the Board's direction to seek strategic alternatives with the assistance of TD Cowen, to figure out ways that we can accelerate the business. Having gone through this process and looked at a lot of different options, we ultimately feel extremely confident that Aperam delivers the best alternative to help accelerate the growth of the company, return a meaningful -- return to shareholders right now. There is going to be more about this, the Board's decision and their determination that the merger was in the best interest of the company and the shareholders. There's going to be a lot more information about the process that comes up, leading up to the signing the agreement that's going to be coming out in our proxy statement to come out here in the near future.

Do you run up against Aperam in your markets or your customer set when you're competing for business? Do they have any like-for-like assets as you? Or is this a kind of a new foray for them?