Industry/Sector: Scrap metal recycling

Deal Type: M&A – Sell-side advisory

FourBridges Team: Andy Stockett, Chris Rowe

Client Profile: Bare Metals Recycling, LLC owns and operates scrap metal recycling facilities in Tennessee and Georgia. Established in 2002, Bare Metals deals in ferrous and non-ferrous materials. The company is based in Chattanooga, Tennessee, and operates facilities in Griffin, Georgia, and Greenville, Georgia.

Client Objectives: Bill Welch, president and co-owner of Bare Metals, contacted FourBridges in early 2010 with the intention of refinancing the company. To determine the amount of capital needed, FourBridges worked with Welch and co-owner Jerry Mendenhall to conduct a “Bridge to Capital.” The assessment included a market-based valuation of the company and a detailed monthly forecast of the company’s cash flow. Based on their analysis, the professionals at FourBridges concluded that selling certain assets of Bare Metals would best meet owner objectives.

The Process: FourBridges used its analysis of the company’s financials to reformat the income statement, providing an adjusted EBITDA that could be realized post-transaction. FourBridges also worked with management to prepare a three-year projection of financial statements. The advisors then gathered information about the company’s facilities, management and future prospects to draft a Confidential Information Memorandum.

Using their extensive databases, FourBridges identified corporate acquirers and private equity groups that appeared to be matches for Bare Metals. More than 25 potential buyers were contacted initially. Interested parties executed Confidentiality Agreements and were provided with the Confidential Information Memorandum. FourBridges received preliminary indications of the range of value acquirers placed on the Company. Those at the high end of the range made company visits and submitted bids with a non-binding term sheet. Each bid was evaluated, and eventually, a Letter of Intent was executed with Gerdau. FourBridges assisted Bare Metals with the closing process, completing the transaction.

The Result: The Chattanooga operations and certain other assets of Bare Metals were sold to Gerdau, SA, a global steel conglomerate based in Porto Alegre, Brazil. The transaction enabled Gerdau to continue its expansion into the Southeastern US, while Welch and Mendenhall were able to maintain Bare Metals operations at their Georgia facilities.