KEC International of India to acquire American transmission tower manufacturer for $95MM

Source: ACON Investments, L.L.C.

An affiliate of ACON Investments, L.L.C.(ACON), a Washington, D.C.-based private equity firm, has signed a definitive agreement to sell 100% of SAE Towers Holdings, LLC (SAE Towers) to KEC International Ltd. (KEC) of India for US$95 million (excluding working capital adjustments) on a debt-free, cash free basis.

Headquartered in Houston, Texas, with production facilities in Monterrey, Mexico and Belo Horizonte, Brazil, SAE Towers is the largest manufacturer of transmission towers in the Americas, with an annual production capacity of 100,000 metric tons. The Company also manufactures steel poles for electrical transmission as well as related hardware. SAE Towers currently has over 800 employees. 

SAE Towers' management team and employees will continue with the Company. Under the leadership of Mr. Luigi Ruggieri, SAE Towers' CEO, the Company will continue to provide its clients throughout the Americas with highly-engineered structures critical for the construction of high-voltage transmission lines. 

SAE Towers was purchased by ACON in 2007 from the power lines components division of ABB Group, the international engineering firm. During the subsequent three years, ACON and the SAE Towers management team transformed and grew SAE Towers, developed new and existing customer relationships, expanded margins and increased backlog almost threefold. As a result, SAE Towers' EBITDA under ACON's ownership increased from $3.5mm in 2007 to a budget of approximately $19.1mm in 2010. The sale of SAE Towers to KEC represents the successful culmination of ACON's investment thesis and despite the challenging overall economic environment will yield proceeds representing over 3.6x ACON's investment in the Company. 

The transaction is expected to close in September 2010, subject to regulatory approvals and customary closing conditions. SAE Towers was advised by Harris Williams & Co. on this transaction while KEC was advised by Sagent Advisors Inc. and Daiwa Capital Markets India Private Limited. 

Mr. Ramesh Chandak, Managing Director & CEO, KEC International Ltd, said, "This acquisition will strengthen KEC's global leadership position in the large and growing markets of North America and Latin America. SAE Towers has a significant presence in geographic areas which are of substantial interest to KEC. The transmission and distribution spend in these regions are currently rapidly increasing. SAE Towers is well positioned to capitalize on these long term growth opportunities." 

We expect the combined entity to derive significant operational synergies, procurement & administrative cost savings and marketing opportunities. Going forward, we expect to leverage SAE Towers' existing customer relations for KEC's other business segments as well." 

We look forward to working with SAE, its talented management team, employees and its respected customers. We are very proud to become the largest international tower manufacturing company in the world." 

Mr. Jose Knoell, Partner of ACON, added, "We are very pleased that KEC and SAE Towers' management team will be working together to further develop SAE Towers' business throughout the Americas. Given its experience and resources in power transmission globally, KEC will be an excellent home for SAE Towers. We are also extremely proud of the significant shareholder value that SAE Towers' management team generated within a short amount of time and amidst one of the most challenging macroeconomic environments in recent history." 

Mr. Luigi Ruggieri, CEO of SAE Towers, concluded, "The development of power infrastructure in Brazil and Mexico will represent a compelling market opportunity for KEC for many years to come as power consumption outpaces GDP growth in these markets. In addition, KEC and SAE Towers are uniquely positioned to play a key role in the expansion and upgrading of the US and Canadian power grid, where significant investment is required to improve reliability and support the development of new wind, solar and conventional generation. Our management team is very enthusiastic about joining KEC and also bringing expanded products and services to our valued customers."



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