Kennametal Inc. announced May 19 that it has signed a definitive agreement to sell its high-speed steel drills, related product lines and assets to Top Eastern Drill Company Ltd. (TDC). This sale is in alignment with Kennametal's strategy to shape its business portfolio and rationalize its manufacturing footprint. The transaction, which is expected to close in June 2009, remains subject to negotiated conditions of closing.
Top-Eastern Drills is a global manufacturer of high-speed steel drills and taps. In addition to its core business, TDC owns and operates; both a molybdenum and a tungsten mine and processing facilities, a state of the art steel making plant, a tungsten carbide manufacturing plant, and is a manufacturer of coating equipment for the metal industry.
Kennametal expects to receive $29 million in proceeds from the divestiture and recognize a pre-tax loss on the sale and related pre-tax charges estimated to amount to a total of $30 million to $33 million, the majority of which will be recorded in the quarter ending June 30, 2009.
The transaction includes four facilities and operations specifically related to the product lines located at Evans, Ga.; Clemson, S.C.; Mexico City, Mexico; and Mississauga, Ontario, Canada. Kennametal presently has approximately 400 employees who are located at these facilities or otherwise involved with these product lines.
The company expects to apply the proceeds from the sale to enhance liquidity and preserve operating flexibility during the current economic downturn.
