Stella-Jones Inc. Tuesday said it has signed a non-binding letter of intent to acquire Tangent Rail Corp., a provider of wood crosstie products and services to the railroad industry. The company said the acquisition will expand Stella-Jones’ capabilities within the U.S. railway tie industry and provide Stella-Jones with creosote manufacturing operations.
St. Laurent, Quebec-based Stella-Jones produces and markets industrial pressure treated wood products, specializing in the production of railway ties and timbers as well as wood poles supplied to electrical utilities and telecommunications companies. The company is listed on the Toronto Stock Exchange.
Pittsburgh-based Tangent serves the railroad industry with treated wood products, mainly railway ties, through facilities located in Warrior, Ala., Terre Haute and Winslow, Ind., Alexandria, La., and McAlisterville, Pa. Tangent produces creosote for wood preservation at distilleries in Terre Haute and in Memphis. Lifecycle solutions, consisting of tie pickup and tie disposal, are carried out at three facilities in Alabama, Minnesota, and North Carolina. Stella-Jones said Tangent’s sales for the year ended December 31, 2009 are expected to reach about US$175 million.
“The acquisition of Tangent Rail Corporation would considerably enhance our offerings to the U.S. railroad industry, while alsoextending our geographical reach,” said Stella-Jones President and CEO Brian McManus. “Tangent enjoys a solid market reputation and possesses high-quality assets, which should facilitate its integration into our network if the transaction is completed.”
The transaction is expected to close before the end of the first quarter of 2010, and is subject to U.S. antitrust clearance, as well as customary closing conditions, including entry into a definitive purchase agreement, regulatory approvals, and satisfactory due diligence.
Stella-Jones said it plans to finance the acquisition through a combination of equity and debt, subject to prevailing market conditions.