Industrials
Exited
Located in Johnston, Pennsylvania, Gautier Steel’s history traces back to the late 19th century, when industrialism gave rise to the American iron and steel industry in the Northeast. Today, Gautier operates three bar mills and a modern plant with in-house straightening capabilities, a metallurgical and testing lab, presses and a cold saw, and ability to accommodate special packaging requirements.
Gautier Specialty Metals has built a premier plate and flat bar conversion rolling mill to provide advanced high performance metals to a variety of industries. This facility has at its heart a 58” wide 4 High Mesta Reversing Mill, capable of rolling the most difficult of specialty metals and is future expandable to 110” wide. Building on Gautier Steel’s long legacy of short lead times and excellent customer service, GSM will be able to provide high quality alloy, tool, and stainless steels as well as the advanced nickel based and titanium alloys in the plate and flat bar form.
Case Study Details
Background
- New State partnered with a family office to invest in Gautier’s bar mill, a stable, non-cyclical asset, with a compelling growth opportunity through a significant investment in a new specialty plate mill
- We built a relationship with the sellers over a multi-year period and stayed in close contact, thereby enabling us to source the opportunity on a proprietary basis
- We closed the investment in January 2014 and completed the ESOP conversion in November 2017
Why an ESOP?
- The ESOP conversion provided an opportunity to share ownership with the company’s employees; given it is a smaller group, we believe the growth in equity value over time will provide meaningful retirement benefits for the team
- We structured the ESOP as a tax-free S-Corp, which has further accelerated equity value creation through enhanced free cash flow and rapid debt amortization
Key Transaction Considerations
- A portion of Gautier’s employees were unionized; we were able to structure the ESOP to maintain the union’s profit-sharing plan, while granting wealth generation opportunities for non-union employees as well
At Gautier, New State established an active board, whose directors
include experienced industry veterans who interact directly with Management as advisors and counselors. They have maintained a commitment to growth by fostering continued investments in new equipment and technologies and by encouraging market expansion into new alloys and product forms.”
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