Kadant to acquire Johnson Corp., extend paper industry offerings

Kadant Inc. has entered into a definitive agreement to acquire The Johnson Corporation for approximately $102 million in cash, subject to a post-closing adjustment that could add $8 million to the price...

ACTON, MA, April 7, 2005 (BUSINESS WIRE) -- Kadant Inc. has entered into a definitive agreement to acquire The Johnson Corporation for approximately $102 million in cash, subject to a post-closing adjustment.

The parties have also agreed to an earn-out provision, based on the achievement of certain revenue targets over a period of 12-15 months following the closing, which could increase the purchase price by up to $8 million.

In addition to the cash consideration, Kadant will issue a letter of credit to the sellers for approximately $4 million, subject to adjustment, related to certain expected tax benefits of Johnson, the value of which is expected to be realized by Kadant.

Kadant is currently negotiating a credit facility of $85 million, including a $25 million revolver, to finance a portion of the purchase price. The completion of the acquisition is subject to customary closing conditions, including regulatory approvals and the approval of Johnson's stockholders, as well as Kadant securing at least $55 million in financing. The closing is expected to occur in the second quarter of 2005.

Kadant expects the acquisition to be accretive to GAAP earnings per share (EPS) in 2005 by $.05 to $.07, and by approximately $.25 in 2006.

Johnson is the leading supplier of steam and condensate systems, hardware, and controls used in the dryer section of paper production. The company is privately held, with estimated 2004 revenues of $76 million and estimated adjusted EBITDA margins of 15 to 17 percent based on December 31, 2004, unaudited financial statements provided by Johnson. Johnson's primary products include rotary joints, syphons, and related steam and condensate systems. The rotary joints act as seals that connect rotating components with fixed piping to convey steam, water, air, or heat transfer oils. These products are used to optimize drying in the paper industry, and also have applications in industrial cylinder heating and cooling processes in machine tool, plastics, rubber, steel, and textile production.

Johnson is based in Three Rivers, Michigan, USA, and has approximately 575 employees at operations in North and South America, Europe, and Asia. The Three Rivers facility includes a world-class R&D center that features two commercial-size paper drying cylinders for conducting product research and customer trials, and extensive joint and seal testing capabilities. Johnson has been in business for more than 70 years.

"The agreement to acquire Johnson marks the culmination of our search for a company that could extend our technology-based offerings in the paper industry," said William A. Rainville, chairman and chief executive officer of Kadant. "We are excited about adding Johnson's premier brand to our family of high-end products. Like Kadant, Johnson's products and services add high value at critical points in the papermaking process, for relatively low cost. Johnson not only offers complementary products, a large aftermarket business, and expanded market coverage, but also shares Kadant's long history of innovation and leadership as a paper industry supplier. In addition, through its ties to other industries, I believe Johnson will allow us to apply our technologies to a number of growth opportunities in new markets."

Kadant Inc. (www.kadant.com) is a leading global supplier of a range of products that improve quality and productivity in pulp and paper production, including stock-preparation equipment, water-management systems, and paper machine accessories. Kadant, based in Acton, Mass., had about $195 million in revenues from continuing operations in 2004 with 950 employees worldwide.


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