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Widia, with approximately $240 million in sales, is a manufacturer and marketer of metalworking tools, engineered products and related services in Europe and India. "Widia is an excellent strategic fit for Kennametal. It is a major supplier to the European and Indian metalworking industries with strong brands, highly respected technology, and a large, loyal customer base. The addition of Widia with its strong market presence will allow us to generate substantial shareowner value over time," said Markos Tambakeras, President and CEO of Kennametal Inc.
Founded in 1925, Widia has an extensive product line of metalworking consumables, and is recognized in milling applications. The company employs approximately 3,400 employees, and operates eight manufacturing facilities in Europe and two in India. Widia's German operations will be merged into a new Kennametal European subsidiary at the closing. Widia sells primarily through direct sales and has sales and service personnel in many European countries.
"The acquisition of Widia demonstrates further Kennametal's commitment to enhancing a leading position in its core metalworking business. While it strengthens further our total global market share, it is primarily a major step in executing our strategy to extend our reach to market leadership positions in Europe and Asia. Furthermore, our ability to achieve our goal of being the best at improving our customers' manufacturing competitiveness will be enhanced with the addition of Widia's strong sales force and compatible organizational culture," Mr. Tambakeras continued.
The company plans to fund the acquisition on a permanent basis as part of a comprehensive refinancing of its capital structure, the key components of which are expected to be the establishment of a new, three-year revolving credit facility, public term debt, and the issuance of $100-150 million of equity. Sufficient capacity exists under the company's existing bank credit facilities to fund the acquisition should the transaction close prior to completion of one or all of the planned financing transactions. The company believes these financing arrangements are consistent with its commitment to investment grade ratings. The company expects its Corporate Credit Rating to remain rated BBB by Standard & Poor's and its senior unsecured debt to remain rated Ba1 by Moody's, but be revised to BBB- by Fitch. This announcement does not constitute an offer of any securities for sale by the company.
Nick Grasberger, VP and CFO added, "We are highly confident that this transaction will meet our financial objectives and deliver increased shareowner value. The acquisition becomes accretive to earnings and margins within twelve to eighteen months, and to return on capital by the end of the second year. We expect to realize meaningful cost synergies in the integration process, as we have done in previous transactions in Europe."