BNS Co. - Press Releases - November 17, 2000

BNS Co. > Press Releases > November 17, 2000

FOR IMMEDIATE RELEASE NOVEMBER 17, 2000
CONTACT: ANDREW C. GENOR, VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
TELEPHONE: (401) 886-2207

North Kingstown, Rhode Island, NOvember 17, 2000 -- Brown & Sharpe Manufacturing Company (NYSE:BNS) today announced that its Board of Directors, at a special meeting held Thursday night, November 16, 2000, unanimously approved entering into an Acquisition Agreement with Hexagon, A.B. of Stockholm, Sweden, in which Hexagon will purchase substantially all of Brown & Sharpe's Worldwide Metrology Business. The purchase price for the Metrology Business is $160 million in cash, plus an additional contingent cash payment up to a potential maximum of $20 million, based on the Company's Year 2000 adjusted Metrology Business Operating Profit. The Metrology Business is comprised of Brown & Sharpe's Measuring Systems Group, headquartered in North Kingstown, Rhode Island, with factories in Italy, Germany, Lithuania and China; its Precision Measuring Instruments Division, headquartered in Renens, Switzerland; and its Custom Metrology Division, headquartered in Telford, U.K. Brown & Sharpe's Metrology Business, which comprises substantially all of the Company's operating business and assets, had sales in 1999 of $321.4 million.

Brown & Sharpe will retain ownership of its Software Development Business, BSIS, Inc., which is focused on the commercialization of its new XACTMEASURE Metrology Software, in development for approximately three years and nearing market introduction. Hexagon has also agreed to invest $2.5 million in BSIS at the closing of this transaction for a 16.7% ownership stake and will invest an additional $1.5 million in each of the next three years, raising its ultimate stake to a maximum of 46.7%. In addition, Hexagon will continue, through the Measuring Systems Group, a close relationship with Wilcox Associates, Inc., who manufactures PC-DMIS, the leading software package currently sold with Brown & Sharpe's Metrology Products.

In addition to its retained interest in BSIS, the value of which embryonic software business is extremely difficult to judge, the Company will retain after the Closing, on a temporary basis, the North Kingstown facility (where it will be the landlord leasing to Hexagon and the third party tenants now in place) and ownership of real estate near Heathrow Airport in the U.K., both of which will be retained only for eventual sale.

Brown & Sharpe will pay off immediately at the Closing all of the Company's outstanding debt to a group of insurance companies and to four commercial banks, aggregating approximately $77 million. The Company has also retained various liabilities which it must pay shortly after the Closing or set aside cash for eventual settlement. These include various ERISA-type liabilities under employee benefit plans and other contractual severance or contingent liabilities.

Accordingly, the Company plans to retain BSIS and use substantially all the net cash proceeds available after the Closing to fund a substantial distribution to shareholders (or fund a tender for purchase by the Company of outstanding shares), and not for acquisitions or development of other new businesses.

Such distribution transaction is expected to be non-taxable to shareholders, and a share repurchase may be taxed as a capital transaction. Since there are a number of details remaining to be resolved, including the fact that the purchase price payable by Hexagon is subject to upward adjustments, depending on Brown & Sharpe's actual 2000 operating results, it is not possible to determine the dollar amount per share contemplated to be paid to shareholders after the Closing. However, based upon evaluations of all of the unknown or variable factors, it is estimated by Management that the ultimate distribution of cash, including the expected proceeds of the sale of the North Kingstown facility and the U.K. real estate, could be in the range of $5.50 to $6.00 per share. Further details will be available after appropriate Board consideration of the distribution/repurchase matter. Further information regarding the expected net aggregate purchase price and net aggregate retained liabilities will then be set forth in the Company's Proxy Statement, which will be filed with the SEC next month and subsequently mailed to shareholders, seeking shareholder approval of the transaction with Hexagon and related matters.

"We are very excited to be involved with Hexagon.", stated Ken Kermes, President and CEO of Brown & Sharpe. "The acquisition of Brown & Sharpe's principal businesses by Hexagon is the best possible solution for our shareholders, our customers, our employees and our lenders. It ensures the continuation of the 167 year Brown & Sharpe history, its strong brand name and its quality of products and services worldwide. Hexagon, a Swedish holding company, specializing in the development of mid-sized companies in the global industrial market, sees Brown & Sharpe as a major player in the Metrology Industry, having a strong worldwide distribution network and a good fit with their other industrial businesses."

Hexagon is a publicly owned company traded on the Stockholm Stock Exchange and primarily manufactures metals (bronze, brass and steel), transmission components, industrial weight and temperature measuring equipment in addition to a wide range of products within the industrial and marine hydraulics markets. They have manufacturing operations in Scandinavia, Germany, Estonia, Latvia, Lithuania, Russia, Sri Lanka, China and the U.S.A., among others. The Group has approximately 4,500 employees and net sales of SEK 5.2 billion (U.S. $530 million).

"We see a tremendous potential in acquiring Brown & Sharpe.", stated Hexagon President and CEO, Ola Rollen. "The Brown & Sharpe core high-tech metrology business is strong worldwide. The Brown & Sharpe brands are also strong and well recognized globally, bringing with them an image of high precision and quality products. Geographically, Brown & Sharpe has a very strong distribution network that can be further expanded to accommodate other related products that will allow Hexagon to expand its business into key industrial markets. We've made a strategic decision to redirect our business to focus on this exciting new high-tech market and fully expect to grow Brown & Sharpe for the longer term."

The transaction will also be subject to certain governmental clearances in the United States and Europe, which are expected to be obtained, and certain other closing conditions customary in such transactions.

Brown & Sharpe Manufacturing Company will be conducting a conference call today, November 17, 2000, 1:00 p.m. EDT to discuss its press release distributed this morning. Kenneth N. Kermes, President and Chief Executive Officer, and Andrew C. Genor, Vice President and Chief Financial Officer, will host the call.

If dialing from within the U.S. and Canada, please dial (800) 633-8298 to be connected into the call. Other international callers, please dial (212) 346-6501. Note, you should place your call 10 minutes before the actual starting time.

For those who miss the conference call, a recording of the call is being made available on November 17 from 4:00 p.m. to 9:00 p.m. EDT and November 20 from 9:00 a.m. to 6:00 p.m. EDT. U.S. and Canada callers, please dial (800) 633-8284 to be connected. Other international callers should dial (858) 812-6440. Please enter 16971132 when prompted for a code. Also when prompted please state your name and company name.