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Diversified Industrials - Metals & Materials I Q4 2017
Investment Banking I Industry Spotlight
2
Diversified Industrials - Metals & Materials I Industry Spotlight
Q4 2017
Key Industrial Sector Contacts
Investment Banking
Debt Capital Markets Equity Capital Markets
Mike Brothers Managing Director
Mike Ryan Managing Director
Corporate Banking
Industry Expertise Capital Mkts. Capabilities
Full-service platform with over 200 professionals, offering the following:
Investment Banking
M&A Advisory
Capital Raising
Debt Capital Markets
Loan Capital Markets:
– Pro Rata
– Institutional
Bond Capital Markets:
– Investment Grade
– High Yield
– Acquisition & Bridge Finance
Private Placements
Equity Capital Markets
Initial Public Offerings
Follow-On Offerings
Convertible Debt
Sponsor Coverage
Bill Tyson Co-Head Capital Markets
Jeff Thieman Managing Director [email protected]
Diversified Industrials Group Overview
Jeremy Eberlein Managing Director
Select Diversified Industrials Investment Banking Advisory Transactions
Joe Carson Managing Director
Marc Hirschfield
Vice President [email protected]
Melina Audinelle Director
Chemicals, Plastics & Packaging
Coatings Diversified Chemicals
Packaging Plastics Manufacturing
Industrial Technology
Flow Control Process/Motion Control
Test & Measurement
Metals & Materials
Metal Forming & Machining
Mills & Specialty Metal
Natural Resources & Mining
Processors/Distributors Scrap/Recycling
Specialty Distribution
Automotive Aftermarket
Building & Construction Products
Electrical & Communication
Industrial, MRO & Safety
Transportation & Logistics
Automotive & Heavy Duty Vehicles
Marine
Rail & Rail Services Third Party Logistics
Christopher Mosley Metals West
Rachel Hermanson Metals East
Gregory Eck Asset Based Lending [email protected]
acquired by
portfolio company of
acquired by
portfolio company of
a business unit of
acquired by
Advanced Energy Technologies LLC
a subsidiary of
acquired by
acquired by
acquired assets of
a subsidiary of
GT Acquisition, LLC
recapitalized with
Exclusive Financial Advisor Exclusive Financial Advisor Exclusive Financial Advisor Exclusive Financial Advisor Exclusive Financial Advisor Exclusive Financial Advisor Exclusive Financial Advisor Exclusive Financial Advisor
recapitalized by
3
Diversified Industrials - Metals & Materials I Industry Spotlight
Q4 2017
Senior Diversified Industrials Investment Banking Team
21+ years of investment banking experience, inclusive of: merger & acquisition advisory, restructuring advisory, equity offerings, debt placements, and principal investing
Career primarily focused on middle market industrial companies
Prior to joining Fifth Third in 2014, served as a Director in the Industrials Group of Harris Williams & Co, where Jeremy led the Metals Industry Practice
Previously, Jeremy worked as a Director at National City Capital Markets Investment Banking Group, and was involved in the founding of Resilience Capital Partners executing transactions both as an advisor and as principal investor
BSBA − Ohio University
11+ years of investment banking experience and 16+ years financial industry experience
Prior to joining Fifth Third in 2015, Marc served as Vice President at Corporate Fuel, a New York City-based financial advisory and private equity firm focused on middle market private and public companies
Previously, Marc was with Sterne Agee, a regional investment banking and brokerage firm based in Birmingham, Alabama
BS − University of Florida; MBA − New York University
Jeremy Eberlein (Managing Director)
Marc Hirschfield (Vice President)
Joe Carson (Managing Director)
24+ years of investment banking and financial advisory services experience covering public and private companies in the middle market sector. Joe has significant experience in providing advisory services for mergers and acquisitions, acquisition financings, defense advisory/hostile takeovers, and leveraged buyouts
Prior to joining Fifth Third in 2017, Joe served as Senior Vice President at Caldwell Tanks, in Louisville, KY, a manufacturer of tanks and storage structures that are used for a number of industrial purposes. Joe headed Caldwell Tanks’ Energy Division
Previously, Joe served as a managing director for Western Reserve Partners in Cleveland, where he was co-head of the Industrial Group and executed transactions across the industrials vertical
BSBA − Miami University; MBA − Case Western University
Melina Audinelle (Director)
17+ years of investment banking experience covering public and private companies in both the large corporate and middle market sectors. Melina has significant experience in providing advisory services for mergers and acquisitions, acquisition financings, defense advisory/hostile takeovers, and leveraged buyouts
Prior to joining Fifth Third in 2014, Melina spent five years at Challenger Capital Group, a boutique investment bank providing M&A advisory and structured capital raising
Previously, Melina served as an investment banking associate for JPMorgan Securities, Inc. in Chicago, where she was a member of the Mid-Corporate Investment Banking M&A group
BS – Northwestern University
Office: 216-274-5008 Email: [email protected] Location: Cleveland, OH
Office: 216-274-5152 Email: [email protected] Location: Cleveland, OH
Office: 312-704-4092 Email: [email protected] Location: Chicago, IL
Office: 678-237-4376 Email: [email protected] Location: Atlanta, GA
4
Diversified Industrials - Metals & Materials I Industry Spotlight
Q4 2017
Highlighted FTS Advisory Transaction
January 2018: Fifth Third Securities, Inc. Advises Auto-Vehicle Parts Company on its Recapitalization by Tenex Capital Management
Fifth Third Securities, Inc. acted as the exclusive financial advisor to Auto-Vehicle Parts Company (or “Auveco”) on its January 2018 recapitalization by Tenex Capital Management (“Tenex”). Advising Auveco on the transaction from Fifth Third were Mike Burr, Senior Managing Director; Jeremy Eberlein, Managing Director; Melina Audinelle, Director; C.J. Andriole, Senior Associate; and Colin Schulz, Senior Analyst.
About Auveco
Founded in 1916, Auveco has become one of the predominant providers of automotive fasteners to the body hardware aftermarket as well as general industrial fasteners used in maintenance, repair, and operations applications within North America. Auveco sells to thousands of wholesale distribution customers who subsequently service hundreds of thousands of collision centers, repair shops, dealerships, and general manufacturers located throughout North America.
About Tenex
Tenex is a private equity firm that invests in middle-market companies. Tenex uses an in-house team of hybrid investment professionals skilled in operational leadership, investing and capital markets structuring to maximize long-term value creation. Tenex’s deep operating experience allows the firm to collaborate with management teams to capitalize on business and market opportunities. Tenex has successfully invested in a diverse range of industries, including industrials, manufacturing, and health and business services.
January 2018
has been recapitalized by
The undersigned served as Exclusive Financial Advisor to Auveco in connection with this transaction
5
Diversified Industrials - Metals & Materials I Industry Spotlight
Q4 2017
Highlighted FTS Advisory Transaction
January 2018: Fifth Third Securities, Inc. Advises Diamond Metals Distribution, LLC on its Recapitalization with Kian Capital
January 2018
has been recapitalized with
The undersigned served as Exclusive Financial Advisor to Diamond in connection with this transaction
Fifth Third Securities, Inc. acted as the exclusive financial advisor to Diamond Metals Distribution, LLC (“Diamond”) on its January 2018 recapitalization with Kian Capital (“Kian”). Advising Diamond on the transaction from Fifth Third were Jeremy Eberlein, Managing Director; C.J. Andriole, Senior Associate; and Colin Schulz, Senior Analyst.
About Diamond
Diamond is a Cleveland, Ohio based steel service center with customers that include tool and die shops, mold shops, machine shops, and general metalworking manufacturers. Diamond provides value-added services, such as production saw cutting, flame cutting, pre-squared finishing, and grinding and milling services to tool steels, hot and cold rolled steels, powdered metals, and alloy plates and rounds.
About Kian
With offices in Atlanta, GA and Charlotte, NC, Kian is a private investment firm that makes mezzanine debt and equity investments in leading lower middle-market companies across a broad range of industries, typically providing between $5 million and $20 million of capital per transaction. Kian partners with management teams and independent sponsors to build and grow successful, high-quality businesses. Kian’s team has deep expertise across the capital structure, including control private equity, mezzanine debt and leveraged senior debt, which enables Kian to be flexible, value-added partners to help support the long-term objectives of business owners.
6
Diversified Industrials - Metals & Materials I Industry Spotlight
Q4 2017
+34%
(2)%
+25%
+21%
[1] Company Websites [2] Bloomberg [3] American Iron and Steel Institute [4] Association of Oil Pipelines
Selected Price Performance Benchmarks (% monthly change) [6]
+23%
Latest Twelve Months (“LTM”) Share Price Performance [7,8]
Market Insights Metals & Materials
RECENT HEADLINES December 11, 2017: Tenaris, a Luxembourg-based manufacturer and distributor of
steel pipe products, unveiled its $1.8 billion pipe mill in Bay City, TX[1]
− 1.2 million square foot mill incorporates high level of automation and technology, designed to compete with various Asian imports in the shale fracking market
− Strategically located near key shale plays and reaffirms Tenaris commitment to U.S. market and domestic manufacturing
November 21, 2017: Nucor Corp. announced plans to build a $250 million rebar micro mill in Sedalia, MO, about 90 miles east of Kansas City (expected to begin operations in 2019)[1]
− Strategically located near customers that use Nucor’s product offerings in buildings, bridge piers, and highways
November 15, 2017: Competitive dynamics in the aerospace market have heated up, after Boeing announced a $27bn order to sell 225 737 MAX aircrafts to FlyDubai (largest ever single-aisle jet order)[2]
− The order followed the November 14, 2017 announcement of Airbus’ $50bn order to sell 430 airplanes to Indigo Partners (owner of Frontier Airlines)
MARKET UPDATES AND TRENDS Adjusted YTD U.S. raw steel production through December 9, 2017 was 85.1 million
net tons, at a capacity utilization rate of 74.5%[3]
− Up 4.3% from the 81.6 million net tons produced during the same period last year, when capacity utilization was at 70.5%
Raw steel production (total of 1.7 million net tons) by U.S. region in thousands of net tons for the week ended December 9, 2017 was as follows: Northeast – 202; Great Lakes – 607; Midwest – 169; Southern – 621; Western – 73[3]
On November 15-16, the majority of U.S. carbon hot-rolled, cold-rolled, and coated steel producers announced a $30/NT price increase, effective immediately
− Hot-rolled pricing, which descended to a low of $560/NT in October, returned to $600/NT in November, with mills currently quoting as high as $640/NT
− Cold-rolled approached $800/NT, albeit at a wide pricing variance at $760 to $820/NT
After a boom in pipeline construction (22% increase)[4] from 2010 to 2014 when U.S. oil prices were at ~$100/bbl, followed by a sharp decline in pipeline construction project output in 2015 and 2016, oilfield investments in line pipe have since rebounded
− The Simdex Future Pipeline Projects database reports 155 pipeline construction projects for a total of 24,000 miles planned over the next three years
− The American Petroleum Institute’s (“API”) 2017 infrastructure report projects oil, gas and natural gas pipeline development annual average capital expenditures of $12.3bn to $19.0bn from 2017 through 2035
− One major project that recently received approval from the Trump administration in March 2017 is the Keystone XL pipeline
TransCanada’s 36” diameter crude oil pipeline, aiming to transport 830,000 barrels per day from the Alberta oil sands to Steel City, NE, is planned to require 821,000 NT of pipe in Canada and another 660,000 NT in the U.S.
Global Crude Steel Production (million tons) [5]
+18%
Source Websites: [1] https://www.washingtonpost.com/news/wonk/wp/2017/08/09/trump-edges-closer-to-a-trade-war-with-china-thanks-to-aluminum-foil/?utm_term=.74261d9f4418 [2] Potential: http://www.reuters.com/article/us-usa-trump-steel-idUSKBN17M237
Ch
ina
an
d R
est
of
Wo
rld
No
rth A
merica
[5] World Steel Association [6] Steelbenchmarker, S&P Capital IQ as of December 29, 2017 [7] S&P Capital IQ as of December 29, 2017 [8] Detail related to indices can be found on pgs. 7 – 10
RECENT INFRASTRUCTURE AND TRADE HEADLINES
The Trump Administration’s $1 trillion infrastructure plan is gaining visibility, after more than 500 infrastructure projects were recently submitted for proposal from every U.S. state and several U.S. territories, totaling over $500 billion [1]
− President Trump granted permit for construction of the Keystone XL pipeline March 24, 2017
− Notables currently in plan: $45 billion Alaska Pipeline and LNG Project; $25 billion Gateway Rail Tunnel Project connecting New York and New Jersey; $15 billion California WaterFix (Bay Delta Tunnels) Project [1]
Current prioritization and future result of the U.S. Section 232 case, which allows the President to adjust imports if excessive foreign imports are found to be a threat to national security, serves as a potential catalyst to the broader Metals & Materials industry
− Potential macroeconomic result: less foreign steel imports in the U.S., leading to an increase in domestic metals production
MARKET UPDATES AND REVIEWS
Although China still disproportionately utilizes blast furnaces to produce the majority of its steel, the U.S. continues to transition to more energy and operationally efficient arc furnaces for raw steel production [2]
− U.S. electric arc furnace output increased 6.6% while U.S. blast furnace output was down 3.0% in 1Q 2017 when compared to 1Q 2016 [2]
Adjusted YTD Jun-2017 U.S. steel production was 41.6 million net tons, up 2.5% from the same period last year [2]
− YTD Jun-2017 U.S. steel production capability utilization rate of 74.4%, increasing 1.8% from the same period last year [2]
GLOBAL CRUDE STEEL PRODUCTION TRENDS
YTD May-2017 global crude steel production increased 4.9% when compared to the same period last year [3]
− Chinese steel production out-paced North American production in the first five months of the year, growing at 4.3% Y-o-Y versus 3.6% Y-o-Y [3]
However, North America recently experienced a favorable steel production uptick, growing 4.2% in May 2017 M-o-M from April 2017, while Chinese steel production declined 0.7% over the same period [3]
MAJOR INDUSTRY PLAYERS: LAST TWELVE MONTHS STOCK PERFORMANCE
Since June 2016, all public market Metals & Materials indices have outperformed the S&P 500, excluding the Processors/Distributors index
− Metal Forming & Machining index trending upwards YTD 2017
− Scrap/Recycling public companies marginally performed most favorably over the last twelve months from a pricing perspective, gaining 31% since June 2016
5
10
15
20
20
40
60
80
No
v-1
0
Mar
-11
Jul-
11
No
v-1
1
Mar
-12
Jul-
12
No
v-1
2
Mar
-13
Jul-
13
No
v-1
3
Mar
-14
Jul-
14
No
v-1
4
Mar
-15
Jul-
15
No
v-1
5
Mar
-16
Jul-
16
No
v-1
6
Mar
-17
Jul-
17
No
v-1
7
ROW China North America
(15%)
(10%)
(5%)
0%
5%
10%
15%
Dec
-16
Jan
-17
Feb
-17
Mar
-17
Ap
r-17
May
-17
Jun
-17
Jul-
17
Au
g-1
7
Sep
-17
Oct
-17
No
v-1
7
Dec
-17
Hot-Rolled Steel Coil ($/ton) Cold-Rolled Steel Coil ($/ton)
Copper ($/lbs.) Zinc ($/ton)
(25%)
0%
25%
50%
Dec-16 Mar-17 Jun-17 Sep-17 Dec-17
Metal Forming & Machining Mills & Specialty MetalNatural Resources & Mining Processors/DistributorsScrap/Recycling S&P 500
7
Diversified Industrials - Metals & Materials I Industry Spotlight
Q4 2017
+87%
+74% +85%
Sub Sector Indices’ Stock Price Performance and Valuation Summary
Metals & Materials 5-Year Share Price Performance Metals & Materials 5-Yr. Median EV/1-Yr. Forward EBITDA Valuation
Public Market Valuation Trends Metals & Materials
Source: S&P Capital IQ as of December 29, 2017
+22% +18%
(33%)
Sub SectorNumber of
Companies
Median
Enterprise Value
Mean
% Change in Stock Price
Median TEV /
LTM Multiples
Median TEV /
Forward Multiples
$ in millions 6 Months 12 Months Revenue EBITDA Revenue EBITDA
Metal Forming & Machining 18 $1,963 11% 23% 1.4x 11.4x 1.5x 10.1x
Mills & Specialty Metal 19 $4,264 21% 25% 0.9x 8.6x 0.9x 8.0x
Natural Resources & Mining 6 $43,835 47% 34% 1.4x 6.6x 1.4x 5.6x
Processors/Distributors 6 $1,797 9% (2%) 0.6x 9.9x 0.6x 9.1x
Scrap/Recycling 4 $2,928 17% 21% 0.6x 11.2x 0.6x 8.7x
S&P 500 500 10% 18% 2.5x 12.8x 2.3x 10.8x
(100%)
(75%)
(50%)
(25%)
0%
25%
50%
75%
100%
Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17
Metal Forming & Machining Mills & Specialty MetalNatural Resources & Mining Processors/DistributorsScrap/Recycling S&P 500
3.0x
5.0x
7.0x
9.0x
11.0x
13.0x
Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17
Metal Forming & Machining Mills & Specialty Metal
Natural Resources & Mining Processors/Distributors
Scrap/Recycling S&P 500
8
Diversified Industrials - Metals & Materials I Industry Spotlight
Q4 2017 Comparable Public Companies Metals & Materials – Metal Forming & Machining
Operating & Trading Statistics ($ in millions, except per-share data)
NA – Not available NM – Not meaningful E – Estimate Enterprise value equals market capitalization plus minority equity plus debt minus cash Source: S&P Capital IQ as of December 29, 2017
Stock % of 52- Enterprise Value /
Price at Week Market Enterprise Revenue Growth LTM Margins Debt / Price / Revenue EBITDA
12/29/17 High Cap Value '15A - '16A '16A - '17E Gross EBITDA EBITDA Earnings LTM 2017E LTM 2017E
Metal Forming
Arconic Inc. $27.25 89% $13,116 $18,229 (0%) (2%) 21.0% 13.5% 4.0x NM 1.4x 1.5x 10.7x 10.1x
Voestalpine AG 59.85 98% 10,553 14,675 (4%) 4% 22.3% 14.3% 2.7x 19.7x 1.0x 1.2x 7.1x 8.4x
Kaiser Aluminum Corporation 106.85 98% 1,806 1,910 (4%) 2% 22.9% 15.6% 1.7x 18.8x 1.4x 1.4x 8.9x 10.2x
Shiloh Industries Inc. 8.20 49% 190 357 (1%) NA 10.6% 6.8% 2.5x 21.6x 0.3x NA 5.0x NA
SIFCO Industries Inc. 6.65 68% 37 67 2% NA 11.6% 3.2% 8.0x NM 0.6x NA 17.2x NA
Median: Metal Forming (1%) 2% 21.0% 13.5% 2.7x 19.7x 1.0x 1.4x 8.9x 10.1x
Industrial Machining
Regal Beloit Corporation $76.60 88% $3,394 $4,455 (8%) 1% 27.0% 14.8% 2.5x 16.6x 1.4x 1.4x 9.1x 9.1x
The Timken Company 49.15 93% 3,815 4,716 (7%) (0%) 26.2% 14.2% 2.5x 31.2x 1.6x 1.8x 11.6x 12.2x
Rexnord Corporation 26.02 98% 2,704 3,789 (0%) 1% 35.3% 17.3% 4.8x 40.7x 1.9x 2.0x 11.2x 9.8x
RBC Bearings Inc. 126.40 90% 2,986 3,163 3% 4% 37.9% 24.2% 1.4x 42.6x 5.0x 4.9x 20.6x 20.5x
Actuant Corporation 25.30 87% 1,517 1,906 (5%) 1% 34.6% 11.3% 4.4x 30.1x 1.7x 1.7x 15.1x 12.6x
Altra Industrial Motion Corp. 50.40 99% 1,475 1,740 (5%) 19% 31.7% 14.6% 2.6x NM 2.1x 2.1x 14.4x 14.1x
CIRCOR International, Inc. 48.68 67% 803 997 (10%) 12% 31.9% 9.9% 4.4x NM 1.6x 1.5x 16.4x 12.2x
Median: Industrial Machining (5%) 1% 31.9% 14.6% 2.6x 31.2x 1.7x 1.8x 14.4x 12.2x
Aerospace Machining
Spirit AeroSystems Holdings, Inc. $87.25 99% $10,088 $10,451 2% 1% 14.2% 10.8% 1.5x 24.6x 1.5x 1.5x 14.2x 9.6x
Triumph Group, Inc. 27.20 78% 1,350 2,749 (9%) (2%) 23.9% 11.0% 3.9x NM 0.8x 0.8x 7.6x 5.9x
Kaman Corporation 58.84 97% 1,637 2,015 2% 3% 29.9% 9.2% 2.6x 30.0x 1.1x 1.1x 12.4x 11.8x
Magellan Aerospace Corp. 16.75 96% 975 1,053 9% 3% 17.6% 15.6% 0.7x 12.4x 1.3x 1.4x 8.6x 7.7x
Ducommun Inc. 28.45 80% 322 541 (17%) 2% 19.1% 9.0% 4.4x 23.5x 1.0x 1.0x 10.7x 9.5x
Heroux-Devtek Inc. 12.14 97% 439 501 (3%) (2%) 16.7% 13.6% 2.4x 18.4x 1.6x 1.7x 11.6x 10.7x
Median: Aerospace Machining (0%) 1% 18.4% 10.9% 2.5x 23.5x 1.2x 1.2x 11.2x 9.6x
All Indices Median (3%) 2% 23.4% 13.6% 2.6x 23.5x 1.4x 1.5x 11.4x 10.1x
9
Diversified Industrials - Metals & Materials I Industry Spotlight
Q4 2017 Comparable Public Companies Metals & Materials – Mills & Specialty Metal
Operating & Trading Statistics ($ in millions, except per-share data)
NA – Not available NM – Not meaningful E – Estimate Enterprise value equals market capitalization plus minority equity plus debt minus cash Source: S&P Capital IQ as of December 29, 2017
Stock % of 52- Enterprise Value /
Price at Week Market Enterprise Revenue Growth LTM Margins Debt / Price / Revenue EBITDA
12/29/17 High Cap Value '15A - '16A '16A - '17E Gross EBITDA EBITDA Earnings LTM 2017E LTM 2017E
Mills & Specialty Metal
NIPPON STEEL & SUMITOMO METAL CORPORATION $25.67 99% $22,645 $44,016 (5%) 11% 12.2% 10.1% 4.1x 19.3x 1.0x 1.0x 9.4x 9.0x
ArcelorMittal 32.56 98% 33,210 47,348 (11%) 13% 11.8% 11.5% 2.0x 10.8x 0.7x 0.7x 6.3x 6.1x
POSCO 311.25 95% 24,900 40,373 (11%) 17% 13.3% 11.8% 3.2x 15.3x 0.8x 0.8x 6.5x 6.5x
Nucor Corporation 63.58 96% 20,213 23,319 (1%) 18% 14.3% 13.4% 1.7x 19.2x 1.2x 1.2x 9.1x 8.0x
Voestalpine AG 59.85 98% 10,553 14,675 (4%) 4% 22.3% 14.3% 2.7x 19.7x 1.0x 1.2x 7.1x 8.4x
Steel Dynamics Inc. 43.13 98% 10,220 11,608 2% 15% 18.7% 14.9% 1.9x 20.4x 1.3x 1.3x 8.6x 7.9x
Alcoa Inc. 53.87 99% 9,967 12,505 (17%) 24% 18.0% 16.7% 0.8x NM 1.1x 1.1x 6.8x 6.2x
United States Steel Corp. 35.19 84% 6,158 7,364 (11%) 18% 8.4% 7.8% 3.2x NM 0.6x 0.6x 8.1x 5.6x
Outokumpu Oyj 9.29 74% 3,835 5,100 (13%) 17% 10.5% 10.5% 2.1x 9.9x 0.7x 0.7x 6.4x 6.0x
Acerinox, S.A. 14.31 84% 3,950 4,773 (9%) 21% 35.4% 10.2% 2.7x 19.8x 0.9x 0.9x 8.6x 8.8x
AK Steel Holding Corporation 5.66 50% 1,782 4,164 (12%) 3% 15.0% 10.6% 3.3x 21.9x 0.7x 0.7x 6.5x 7.0x
Allegheny Technologies Inc. 24.14 91% 2,628 4,517 (16%) 10% 9.9% 9.4% 6.0x NM 1.3x 1.3x 14.1x 11.1x
Commercial Metals Company 21.32 92% 2,487 3,059 9% 12% 13.1% 5.4% 3.4x 32.3x 0.7x 0.6x 12.5x 8.2x
Ferroglobe PLC 16.20 92% 2,786 3,296 21% 6% 34.4% 6.5% 6.5x NM 2.0x 2.0x 30.7x 23.6x
Carpenter Technology Corp. 50.99 95% 2,387 2,970 (1%) 7% 15.2% 13.4% 2.4x NM 1.6x 1.5x 11.7x 11.1x
Schmolz + Bickenbach AG 0.86 85% 815 1,361 (16%) 10% 37.3% 8.0% 2.5x NM 0.4x 0.5x 5.6x 6.4x
Global Brass and Copper Holdings, Inc. 33.10 83% 725 952 (11%) 6% 12.8% 7.3% 2.9x 19.5x 0.6x 0.7x 8.8x 7.6x
TimkenSteel Corporation 15.19 66% 675 814 (21%) 41% NM NM NM NM 0.7x 0.7x NM 9.1x
Universal Stainless & Alloy Products Inc. 21.42 93% 155 232 (15%) 11% 10.0% 10.2% 4.1x NM 1.2x 1.4x 12.2x 9.4x
Median: Mills & Specialty Metal (11%) 12% 13.8% 10.4% 2.8x 19.5x 0.9x 0.9x 8.6x 8.0x
10
Diversified Industrials - Metals & Materials I Industry Spotlight
Q4 2017 Comparable Public Companies Metals & Materials – Natural Resources & Mining, Processors/Distributors, and Scrap/Recycling
Natural Resources & Mining Operating & Trading Statistics ($ in millions, except per-share data)
Processors/Distributors Operating & Trading Statistics ($ in millions, except per-share data)
Scrap/Recycling Operating & Trading Statistics ($ in millions, except per-share data)
NA – Not available NM – Not meaningful E – Estimate Enterprise value equals market capitalization plus minority equity plus debt minus cash Source: S&P Capital IQ as of December 29, 2017
Stock % of 52- Enterprise Value /
Price at Week Market Enterprise Revenue Growth LTM Margins Debt / Price / Revenue EBITDA
12/29/17 High Cap Value '15A - '16A '16A - '17E Gross EBITDA EBITDA Earnings LTM 2017E LTM 2017E
Natural Resources & Mining
BHP Billiton plc $20.58 100% $109,552 $132,655 23% 12% 85.6% 50.2% 1.7x 44.2x 3.5x 3.1x 6.9x 5.5x
Rio Tinto plc 53.28 93% 93,465 107,255 (3%) 17% 20.7% 40.5% 1.0x 20.9x 2.9x 2.7x 7.0x 6.0x
Glencore Plc 5.27 100% 75,174 101,873 4% 19% 2.1% 5.7% 2.9x NM 0.6x 0.6x 9.7x 7.2x
Vedanta Resources plc 10.87 72% 3,035 18,892 7% 17% 23.7% 27.0% 4.2x NM 1.4x 1.4x 5.2x 5.1x
Cliffs Natural Resources Inc. 7.21 58% 2,138 3,613 5% 19% 20.0% 23.0% 3.0x 26.8x 1.5x 1.4x 6.3x 5.1x
ERAMET S.A. 118.91 99% 3,142 4,014 (7%) 14% 19.5% 17.0% 3.4x NM 1.1x 1.1x 6.2x 5.8x
Median: Natural Resources & Mining 4% 17% 20.4% 25.0% 3.0x 26.8x 1.4x 1.4x 6.6x 5.6x
Stock % of 52- Enterprise Value /
Price at Week Market Enterprise Revenue Growth LTM Margins Debt / Price / Revenue EBITDA
12/29/17 High Cap Value '15A - '16A '16A - '17E Gross EBITDA EBITDA Earnings LTM 2017E LTM 2017E
Processors/Distributors
Reliance Steel & Aluminum Co. $85.79 97% $6,255 $8,092 (8%) 10% 29.6% 9.1% 2.3x 19.3x 0.9x 0.9x 9.5x 9.0x
Worthington Industries, Inc. 44.06 83% 2,677 3,459 7% 1% 16.7% 9.1% 2.6x 15.6x 1.1x 1.1x 11.6x 11.6x
Klöckner & Co SE 12.36 79% 1,233 1,748 (14%) 8% 21.5% 3.1% 3.2x 14.2x 0.2x 0.3x 7.7x 7.7x
Russel Metals Inc. 23.26 98% 1,437 1,706 (14%) 19% 19.4% 6.6% 2.3x 18.7x 0.7x 0.7x 10.3x 12.5x
Ryerson Holding Corporation 10.40 70% 387 1,357 (10%) 12% 18.1% 4.5% 7.1x 25.8x 0.4x 0.4x 9.2x 6.1x
Olympic Steel, Inc. 21.49 77% 236 453 (10%) 15% 21.3% 3.2% 5.4x 28.2x 0.4x 0.4x 11.0x 9.2x
Median: Processors/Distributors (10%) 11% 20.3% 5.6% 2.9x 19.0x 0.6x 0.6x 9.9x 9.1x
Stock % of 52- Enterprise Value /
Price at Week Market Enterprise Revenue Growth LTM Margins Debt / Price / Revenue EBITDA
12/29/17 High Cap Value '15A - '16A '16A - '17E Gross EBITDA EBITDA Earnings LTM 2017E LTM 2017E
Scrap/Recycling
Steel Dynamics, Inc. $43.13 98% $10,220 $11,608 2% 15% 18.7% 14.9% 1.9x 20.4x 1.3x 1.3x 8.6x 7.9x
Commercial Metals Company 21.32 92% 2,487 3,059 9% 12% 13.1% 5.4% 3.4x 32.3x 0.7x 0.6x 12.5x 8.2x
Sims Metal Management Limited 12.32 96% 2,484 2,190 12% 3% 14.2% 4.6% 0.0x 30.0x 0.6x 0.5x 12.3x 9.3x
Schnitzer Steel Industries, Inc. 33.50 95% 883 1,025 25% (10%) 13.3% 6.0% 1.4x 21.6x 0.6x 0.7x 10.1x 10.1x
Median: Scrap/Recycling 11% 7% 13.8% 5.7% 1.6x 25.8x 0.6x 0.6x 11.2x 8.7x
11
Diversified Industrials - Metals & Materials I Industry Spotlight
Q4 2017
$587
$700 $704$664
$612 $641 $618
$688 $715 $733 $739
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Cu
mu
lati
ve
Dry
Po
wd
er
($ i
n b
illi
on
s)
2017
2016
2015
2014
2013
2012
2011
2010
2009
Overhang by Vintage
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
U.S. corporate cash balances remain at record levels and are driving activity in strategic buyer M&A
Historically, M&A cycles have not extended past seven years; 2017 was year eight of the current cycle
2017 demonstrated signs that the buyout cycle is slowing, however, numerous positive drivers remain
− The public equity bull market continues to support M&A activity and elevated valuation multiples
Note: This data represents the entire U.S. market (all industries) Source: PitchBook, S&P Capital IQ, and S&P Capital IQ LCD
0
4,000
8,000
12,000
16,000
20,000
24,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Under $25mm $25 to $500mm Above $500mm Undisclosed
Transaction Volume
Recession Recession
▼ 9% ▲30%
S&P 500 – Aggregate Corporate Cash & Equivalents
Over $1.7 trillion
Global Private Equity Capital Overhang by Year
Private equity firms continue to sit on a built up level of dry powder, driving a need to deploy it for acquisitions
Over $735 billion
U.S. M&A Volume and Valuation Trends M&A activity remains elevated, driven by the public equity market’s thirst for growth and excess capital
($ in billions) ($ in billions)
12
Diversified Industrials - Metals & Materials I Industry Spotlight
Q4 2017
U.S. Metals & Materials M&A Announced Deal Volume
U.S. Industrials middle market deal multiples are at a seven-year high, while larger U.S. Industrials deal multiples are above the seven-year average
Recent activity in U.S. Metals & Materials M&A has been driven by middle market transactions
− Highlighted middle market transactions include:
Tailwind Capital’s acquisition of Smith Cooper International, Inc., announced November 18, 2017
Ichor Holdings’ acquisition of Talon Innovations Corporation, announced November 9, 2017
− U.S. deal volume increased slightly in 4Q 2017 from the prior quarter, and was similar on a Q-o-Q basis when compared to 4Q 2016
U.S. Metals & Materials middle market deal multiples have strengthened in 2017 from 2016 and remain in line with the seven-year average
U.S. M&A outlook for Metals & Materials remains strong
− With the expectation of incremental rate hikes in 2018, sellers are expected to capitalize on the current low interest rate environment before the remaining window of opportunity closes
− The public equity bull market continues to support overall M&A activity and elevated valuation multiples
− U.S. corporate cash balances remain at record levels, and are driving activity in strategic buyer M&A
U.S. Metals & Materials M&A Disclosed Deal Value ($ in billions)
U.S. Diversified Industrials M&A Announced Deal Average EV/EBITDA Multiple
Note: Middle Market defined as transactions with disclosed deal values less than $1 billion EV – Enterprise Value ND – No Transaction Values Disclosed NM – Not Meaningful Source: Fifth Third Securities, Bloomberg, PitchBook and S&P Capital IQ
M&A Trends Diversified Industrials and Metals & Materials Specific Activity
0
50
100
150
1Q20
10
2Q
201
0
3Q
201
0
4Q
201
0
1Q
201
1
2Q
201
1
3Q
201
1
4Q
201
1
1Q
201
2
2Q
201
2
3Q
201
2
4Q
201
2
1Q
201
3
2Q
201
3
3Q
201
3
4Q
201
3
1Q
201
4
2Q
201
4
3Q
201
4
4Q
201
4
1Q
201
5
2Q
201
5
3Q
201
5
4Q
201
5
1Q20
16
2Q
201
6
3Q
201
6
4Q
201
6
1Q
201
7
2Q
201
7
3Q
201
7
4Q
201
7
Total U.S. Metals & Materials Deal Volume
$0
$2
$4
$6
$8
$10
1Q
201
0
2Q
201
0
3Q
201
0
4Q
201
0
1Q
201
1
2Q
201
1
3Q
201
1
4Q
201
1
1Q
201
2
2Q
201
2
3Q
201
2
4Q
201
2
1Q
201
3
2Q20
13
3Q
201
3
4Q
201
3
1Q
201
4
2Q
201
4
3Q
201
4
4Q
201
4
1Q
201
5
2Q
201
5
3Q
201
5
4Q
201
5
1Q
201
6
2Q
201
6
3Q
201
6
4Q
201
6
1Q
201
7
2Q
201
7
3Q20
17
4Q
201
7
Middle Market >$1 Billion
8.3x 8.9x 8.7x 8.7x 8.9x 8.8x 8.3x9.5x
11.3x9.6x 10.1x 11.2x 12.0x 13.0x 13.2x 12.2x
0.0x
5.0x
10.0x
15.0x
20.0x
2010 2011 2012 2013 2014 2015 2016 2017
Middle Market >$1 Billion
13
Diversified Industrials - Metals & Materials I Industry Spotlight
Q4 2017
Metals & Materials ($ in millions)
M&A Trends Metals & Materials – Select Transaction Detail
Source: Company Filings, S&P Capital IQ, PitchBook
Transaction's
Date Enterprise Metals & Materials
Announced Acquirer Target Value Sub-Sector
Jan-18 Kian Capital Diamond Metals Distribution, Inc. - Processors/Distributors
Dec-17 Almacenadora Afirme, S.A. de C.V. Northwest Pipe Company; Manufacturing facility located Atchison, Kansas $37 Metal Forming & Machining
Dec-17 AC&A, LLC EnCore Composite Structures, Inc. - Metal Forming & Machining
Dec-17 Waybill USA Inc. North American Tubes Operations of Luvata Oy - Metal Forming & Machining
Dec-17 Wait Industries, LLC Voyager, Inc. - Mills & Specialty Metal
Dec-17 Norgren Inc Bimba Manufacturing Company, Inc. $198 Metal Forming & Machining
Dec-17 Hexcel Corporation (NYSE:HXL) Aerospace & Defense (A&D) Business Of Oxford Performance Materials Inc. - Metal Forming & Machining
Dec-17 Tronair, Inc. Malabar International Inc. - Metal Forming & Machining
Nov-17 Tailwind Capital Group, LLC Smith Cooper International, Inc. - Metal Forming & Machining
Nov-17 Indigenous Roots Corp. American Paramount Gold Corp. (OTCPK:APGA) - Natural Resources & Mining
Nov-17 Schuff Steel Company, Inc. Mountain States Steel, Inc. - Mills & Specialty Metal
Nov-17 Progress Rail Services Corporation Applied Ultrasonics LLC - Metal Forming & Machining
Nov-17 Samuel, Son & Co., Limited Main Steel, LLC - Mills & Specialty Metal
Nov-17 Arlington Capital Partners LP Cadence Aerospace, LLC - Metal Forming & Machining
Nov-17 Cleveland-Cliffs Inc. (NYSE:CLF) Empire Iron Mining Partnership $633 Natural Resources & Mining
Nov-17 Ichor Holdings, LLC Talon Innovations Corporation $130 Metal Forming & Machining
Nov-17 SA Recycling LLC Tennessee Valley Recycling, LLC - Scrap/Recycling
Nov-17 Management Buyout Gautier Steel Ltd. - Mills & Specialty Metal
Nov-17 Right Lane Industries LLC Pacific Press Technologies, Inc. - Metal Forming & Machining
Nov-17 Insteel Industries, Inc. (NasdaqGS:IIIN) Ortiz Engineered Products, Inc., Certain Assets - Mills & Specialty Metal
Nov-17 AC&A, LLC Applied Composites Engineering Inc. - Metal Forming & Machining
Nov-17 A.J. Oster, LLC Unimet Metal Supply Inc. $42 Processors/Distributors
Oct-17 Integrated Global Services, Inc. Cetek Limited - Metal Forming & Machining
Oct-17 Mearthane Products Corporation Elmco Tool Company - Mills & Specialty Metal
Oct-17 Heartland Equity Partners Ajax Metal Forming Solutions - Metal Forming & Machining
Oct-17 MavenHill Capital Connecticut Coining, Inc. - Metal Forming & Machining
Oct-17 Motion Industries, Inc. Apache Inc. - Metal Forming & Machining
Oct-17 Power Products, LLC Bergen Industries Inc. - Metal Forming & Machining
Oct-17 Van Sant Enterprises, Inc. C. Cook Enterprises, Inc., ProLine Metal Shaping Tools - Metal Forming & Machining
Oct-17 Diamond Manufacturing Company, Inc. Ferguson Perforating Company - Metal Forming & Machining
Oct-17 Treasure Investments Corp Bend Bronze, Inc. - Metal Forming & Machining
Oct-17 Cleveland-Cliffs Inc. (NYSE:CLF) Tilden Mining Company L.C. $700 Natural Resources & Mining
Oct-17 American Securities LLC MW Industries, Inc. - Metal Forming & Machining
Sep-17 Quadrant Management General Flange & Forge $3 Metal Forming & Machining
Sep-17 Santa Fe Gold Corporation (OTCPK:SFEG) Bullard's Peak Corporation and Black Hawk Consolidated Mines Company, Inc. $3 Natural Resources & Mining
Sep-17 Kencoa Aerospace LLC Heart of Georgia Metal Crafters, LLC - Metal Forming & Machining
Sep-17 Wolfden Resources Corporation (TSXV:WLF) Base-Metal Project In Penobscot County, Maine, USA $9 Natural Resources & Mining
Sep-17 Auxo Investment Partners Atlas Die LLC - Metal Forming & Machining
Aug-17 PHI Group Inc. (OTCPK:PHIL) Twenty-One Mining Claims in Granite Mining District, Grant County, Oregon $49 Natural Resources & Mining
Aug-17 Kadant Inc. (NYSE:KAI) UNAFLEX, LLC $31 Metal Forming & Machining
Aug-17 TCTM Financial FS LLC Wellman Dynamics Corporation $21 Metal Forming & Machining
Aug-17 New Hampshire Ball Bearings, Inc.; Development Bank of Japan Inc., Investment Arm C&A Tool Engineering, Inc. - Mills & Specialty Metal
Aug-17 Nucor Corporation (NYSE:NUE) St. Louis Cold Drawn, Inc. - Mills & Specialty Metal
Aug-17 Lippo China Resources Limited (SEHK:156); CCI U.S. Asset Holdings LLC CS Mining, LLC $35 Natural Resources & Mining
Aug-17 ConforMIS, Inc. (NasdaqGS:CFMS) Broad Peak Manufacturing LLC, Machining and Polishing Assets $7 Metal Forming & Machining
Aug-17 GenNx360 Capital Partners; Yukon Partners Management, LLC Tooling Technology Group, LLC - Metal Forming & Machining
Aug-17 Speyside Equity LLC Craftsman Custom Metals, LLC - Metal Forming & Machining
14
Diversified Industrials - Metals & Materials I Industry Spotlight
Q4 2017
U.S. Private Equity deal flow was down during the fourth quarter of 2017 on both a volume and deal value basis
Several factors may be fueling the reluctance to complete deals, with two of the biggest centering on price and quality
− Pricing pressures persist with median deal multiples remaining above 10.0x, and the number of viable targets is likely lower than normal following the record levels in 2015 and 2016 on both the strategic and PE sides
− Low yields and low returns on cash holdings may increase the pressure firms feel who want committed capital put to work
2017 was another strong year of fundraising for private equity firms, with dry powder for U.S. private equity firms climbing to $566 billion
The number of active private equity investors has decreased by 3.3% in 2017 when compared to 2016 Y-o-Y
− The number of firms “at risk” of being inactive has increased from 265 in 2017 from 184 in 2016
Metals & Materials private equity disclosed capital invested increased, while number of deals closed decreased in 2017 when compared to 2016 Y-o-Y
− 73 deals closed for a total disclosed value of $2.7 billion during fiscal year ended 2017
The number of private equity exits within Metals & Materials decreased in 2017 when compared to 2016 Y-o-Y, exhibiting a disclosed median deal size of $358 million
Overall U.S. Private Equity Deal Flow ($ in billions)
U.S. Metals & Materials Private Equity Deal Flow ($ in billions)
U.S. Metals & Materials Private Equity Exits ($ in millions)
*4Q17 preliminary PitchBook data ND – No Transaction Values Disclosed Source: Fifth Third Securities, PitchBook
Private Equity Activity Metals & Materials
7363
7871
89 9379
73$3.8
$2.8
$1.2
$1.0
$4.8
$3.8
$1.3 $2.7
2010 2011 2012 2013 2014 2015 2016 2017
# of Deals Closed Disclosed Capital Invested ($)
1013
17
1115
15
2320
$156
$980
$78 $18
$800
$275 $54
$358
2010 2011 2012 2013 2014 2015 2016 2017
# of Exits Disclosed Median Deal Size ($)
0
500
1,000
1,500
$0
$50
$100
$150
$200
$250
1Q
11
2Q11
3Q11
4Q
11
1Q
12
2Q
12
3Q
12
4Q
12
1Q
13
2Q
13
3Q
13
4Q
13
1Q
14
2Q
14
3Q
14
4Q
14
1Q
15
2Q
15
3Q
15
4Q
15
1Q
16
2Q
16
3Q
16
4Q
16
1Q
17
2Q17
3Q17
4Q
17*
Deal Value ($) # of Deals Closed
15
Diversified Industrials - Metals & Materials I Industry Spotlight
Q4 2017
Note: This data represents the entire U.S. middle market (all industries) Note: The middle market is defined as deal size < $100 million and borrower sales < $500 million [1] Includes both non-sponsored and sponsored transactions; sufficient data not available for MM NR loans in 1Q15 and 1Q17 Source: Bloomberg, S&P Capital IQ LCD, and Thomson Reuters LPC
U.S. Middle Market Loan Market Trends
Loan Volume: Low Level of Supply Continues Yields Decline for Middle Market B-rated & Non-rated Issuers [1]
Middle Market Covenant-Lite Volume Declines in 3Q 2017 Leverage Multiples Remain Aggressive on Middle Market LBOs
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
Non-Sponsored Sponsored($ in billions)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
MM B-rated MM NR
5.97%
5.90%
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
MM Covenant-Lite Volume($ in billions)
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
1st Lien Debt to EBITDA Junior Debt to EBITDA
16
Diversified Industrials - Metals & Materials I Industry Spotlight
Q4 2017 Pro Rata Market Update: 3Q 2017 Bank Terms Remain Relatively Unchanged Over Prior Quarter
Structure
Banks reported that standards for C&I loans were essentially unchanged
over the past three months for loans to both large and middle market firms.
However, terms on C&I loans became less restrictive, on balance, with all
specific loan terms either easing or remaining materially similar.
Specifically, a significant net percentage of banks reportedly narrowed
spreads of loan rates over the cost of funds, while a moderate net share of
banks reportedly increased the maximum size of credit lines and decreased
the use of interest rate floors for large and middle market firms
Observations from Fifth Third’s syndicated pro rata loan database:
− Financial Covenants – single covenant deals became slightly more
prevalent through LTM Q3 2017 representing just over 20% of
transactions, with two covenant deals remaining most common,
typically consisting of a maximum leverage and minimum interest or
fixed charge coverage ratio
− Tenors – static at 5 years, co-terminus revolver and term loans.
− Amortization – no discernable market-driven movement, with a
standard 5yr tenor term loan amortizing anywhere between 25-75%,
with ~30-35% amortization being most common
Pricing
While pricing in the pro rata market is highly subjective depending upon
banking relationships and ancillary business, respondents to the Fed Survey
have now reported net pricing reductions for 30 consecutive quarters
In-line with Fed Survey responses, Fifth Third’s pro rata loan database
displayed a 28 bps drop of YoY spread for the 3Q17 vs. 3Q16 period,
bringing the average drawn spread down to L+186
With many pricing grids reaching levels below L+200, pricing levels are
approaching similar levels to investment grade and asset based loans,
suggesting little runway left for further pricing concessions in the pro rata
market
Source: Fifth Third Securities, Federal Reserve Board
Note: based on forward-looking nature of questionnaire, results displayed are from the first month of each respective calendar quarter (e.g. Jul-17 survey shown as proxy for 3Q17)
Average Pro Rata Pricing at Close by Market Segment (as of 3Q17)
LTM 3Q17 Synthetic Leverage Grid for Pro Rata Executions
126 149 162
193 221
240 256
298 322 334
355
L+0
L+50
L+100
L+150
L+200
L+250
L+300
L+350
L+400
Observation: Closing leverage determines ~97% (R2) of the variations in pricing; every 0.5x turn of leverage costs ~25bps (slope)
392420 410
429
275247
269293
186214
192211
L + 0
L + 50
L + 100
L + 150
L + 200
L + 250
L + 300
L + 350
L + 400
L + 450
L + 500
Current Prior Yr. Current Prior Yr.
Trailing 3M Trailing 12M
Middle Market Sponsored Middle Market Non-Sponsored Pro Rata/Bank-Only
17
Diversified Industrials - Metals & Materials I Industry Spotlight
Q4 2017
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Gen. Corp. Purp. Amend & Extends DIP/Exit Fin. M&A Other
Asset Based Lending Market Update
ABL Volume and Deal Count ($ billions)
ABL Average Pro Rata Pricing
Source: Thomson Reuters LPC
3Q 2017: ABL Market Commentary
ABL issuance volumes totaled $23.9 billion in 3Q17, a 14% increase from 3Q16 and a 9% decrease from prior quarter volumes, respectively. YTD volumes totaled $69.7 billion, representing a 15% increase over the prior year period
While total volumes for the year may fall short of record setting levels in 2011 ($101.0 billion), full year 2017 ABL volumes are on track to exceed $85.0 - $90.0 billion
YTD new money deal flow totaled $17.7 billion, or 25% of YTD volumes. Issuance continued to consist primarily of refinancing activity with general corporate purposes being the primary use of proceeds. M&A lending was limited to 10% of YTD volumes
Deal size continued to skew towards the smaller end of the market (sub $250.0 million) as refinancings and add-ons dominated. Larger sized credits north of $500.0 million were heavily weighted towards repricings and opportunistic refinancings, with a handful of acquisition financings also completed
Clubby deals under $150.0 million made up 49% of YTD volumes, while deals ≥ $500.0 million represented 15%
ABL spreads continue to remain low with average drawn pricing at 167 bps and average undrawn pricing at 32 bps
90% of deals ≥ $75 million in size were priced (drawn pricing) below 250 bps, of which 49% were priced between 150-199 bps and 21% were priced below 150 bps
ABL Deal Purpose Dispersion
L+0
L+100
L+200
L+300
Drawn Undrawn
0
20
40
60
80
100
120
$0
$5
$10
$15
$20
$25
$30
$35
Volume Deal Count
18
Diversified Industrials - Metals & Materials I Industry Spotlight
Q4 2017
Economic Dashboard
Industrial Production Index Capital Goods Orders Housing Starts
Source: Board of Governors of the Federal Reserve System
($ in billions)
Source: United States Census Bureau
National Unemployment Rate Real GDP Growth Additions to Non-Farm Payrolls
Housing Starts
Source: Bureau of Economic Analysis Source: Bureau of Labor Statistics Source: Bureau of Labor Statistics
Source: United States Census Bureau
(in thousands of employees)
(in thousands of units)
$200
$225
$250
$275
96
102
108
114
2.3%2.0%
2.6%
2.0%
0.9% 0.8%1.4%
3.5%
2.1%
1.4%
2.6%3.0%
4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
'15 '16 '170
100
200
300
400
750
850
950
1,050
1,150
1,250
1,350
4.0%
5.0%
6.0%
19
Diversified Industrials - Metals & Materials I Industry Spotlight
Q4 2017 Notes & Definitions
S&P 500 Index- A broad index that includes American Companies. EBITDA- A company's earnings before interest, taxes, depreciation, and amortization, is an accounting measure calculated using a company's net earnings, before interest expenses, taxes, depreciation and amortization are subtracted, as a proxy for a company's current operating profitability. Dry Powder- Refers to cash reserves kept on hand to cover future obligations or to purchase assets. GDP- Gross domestic product is the market value of the goods and services produced by labor and property located in the United States Consumer Sentiment Index- The University of Michigan Consumer Sentiment Index is a consumer confidence index published monthly by the University of Michigan. The index is normalized to have a value of 100 in December 1964 National Unemployment Rate- the percentage of the total labor force that is unemployed but actively seeking employment and willing to work. Non-Farm Payroll- Nonfarm payroll employment is a compiled name for goods, construction and manufacturing companies in the US. It does not include farm workers, private household employees, non-profit organization employees, or government employees . It is an economic indicator released monthly by the United States Department of Labor as part of a comprehensive report on the state of the labor market. Housing Starts- are the number of new residential construction projects that have begun during any particular month. The Economist- offers authoritative insight and opinion on international news, politics, business, finance, science, technology and the connections between them LBO -- leveraged buyout (LBO) is the acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company. Industrial Production Index (IPI)- is an economic indicator published by the Federal Reserve Board of the United States that measures the real production output of manufacturing, mining, and utilities Capital Goods Orders. Covenant-lite loans- means that debt is being issued, both personally and commercially, to borrowers with less restrictions on collateral, payment terms, and level of income. IRR-Internal Rate of Return.
About Fifth Third Capital Markets
Fifth Third Capital Markets is the marketing name under which Fifth Third Bank and its subsidiary, Fifth Third Securities, Inc., provide certain securities and investment banking products and services. Banking products and services are offered by Fifth Third Bank. Securities products and services are offered by licensed securities representatives of Fifth Third Securities, Inc., who may be employees of Fifth Third Bank. Important notice This document has been prepared by Fifth Third Bank (“Fifth Third”) or one of its subsidiaries for the sole purpose of providing a proposal to the parties to whom it is addressed in order that they may evaluate the capabilities of Fifth Third to supply the proposed services. It is not intended to provide specific investment advice or investment recommendations and does not constitute either a commitment to enter into a specific transaction or an offer or solicitation, with respect to the purchase or sale of any security. The information contained in this document has been compiled by Fifth Third and includes material which may have been obtained from information provided by various sources and discussions with management but has not been verified or audited. This document also contains confidential material proprietary to Fifth Third. Except in the general context of evaluating our capabilities, no reliance may be placed for any purposes whatsoever on the contents of this document or on its completeness. No representation or warranty, express or implied, is given and no responsibility or liability is or will be accepted by or on behalf of Fifth Third or by any of its subsidiaries, members, employees, agents or any other person as to the accuracy, completeness or correctness of the information contained in this document or any other oral information made available and any such liability is expressly disclaimed. This document and its contents are confidential and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person in whole or in part without our prior written consent. Past performance is No Guarantee of Future Results. Fifth Third Capital Markets is a wholly owned subsidiary of Fifth Third Bank offering investment banking++, debt capital markets+, bond capital markets++, equity capital markets++, financial risk management+, and fixed income sales and trading++. Fifth Third Bank provides access to investments and investment services through various subsidiaries, including Fifth Third Securities. Fifth Third Securities is the trade name used by Fifth Third Securities, Inc., member FINRA/SIPC, a registered broker-dealer and registered investment advisor registered with the U.S. Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training. Securities and investments offered through Fifth Third Securities, Inc. and insurance products: + Services and activities offered through Fifth Third Bank ++ Services and activities offered through Fifth Third Securities, Inc © Fifth Third Bank 2018
20
Are Not FDIC Insured Offer No Bank Guarantee May Lose Value
Are Not Insured By Any Federal Government Agency Are Not A Deposit