Harsco (HSC) To Divest IKG Business, Exit Industrial Segment

Harsco Corporation (NYSE:HSC) announced on Jan 10 that it signed an agreement with KPS Capital Partners, LP to sell its IKG business. The divestment of the Houston-based business will likely fetch Harsco $85 million — comprising notes and cash.

The private equity firm KPS Capital Partners invests in industrial and manufacturing companies globally. Investments are primarily spread across capital equipment, luxury product, basic material, general manufacturing, branded customer, healthcare and automotive part industries. The firm’s assets under management totaled $11.5 billion as of Oct 15, 2019.

Discussion on Divestment

As noted, Harsco’s IKG is well-recognized for its superior-quality bar grating (both aluminum and steel), innovative solutions and expertise. Its products are mainly used in security, safety and industrial flowing applications. Based in Houston, TX, IKG has manufacturing facilities in Mexico and the United States. Also, IKG employs 350 people worldwide.

Subject to the receipt of approvals and fulfillment of closing conditions, Harsco anticipates closing the divestment in early 2020. It intends on using the cash proceeds (net) for repaying debts, while the notes, worth $40 million, will be paid gradually.

It is worth noting here that IKG was part of Harsco’s Industrial segment. The business divestment will allow Harsco to focus on high growth opportunities in the environmental solutions arena.

Actions Related to Harsco Industrial Segment

Harsco’s Industrial segment comprised Air-X-Changers, Patterson-Kelley and IKG businesses. In May 2019, the company announced an agreement to sell the Air-X-Changers business to Chart Industries, Inc. (NASDAQ:GTLS) for $592 million in cash. Concurrently, Harsco communicated its intention to divest the other two businesses as well.

In July 2019, the company completed the divestment of its Air-X-Changers business, while it sold its Patterson-Kelley business to an affiliate of SPX Corporation (NYSE:SPXC) for $60 million in cash.

Harsco will complete the full divestment of its Industrial segment with the completion of the IKG transaction.

Zacks Rank, Estimate Trend and Price Performance

With a market capitalization of $1.6 billion, Harsco currently carries a Zacks Rank #3 (Hold).

In the past three months, the company’s shares have gained 14.9% compared with the industry’s growth of 10.4%.

Meanwhile, the Zacks Consensus Estimate for its earnings has been unchanged at $1.41 for 2019 (results pending) and $1.55 for 2020 in the past 60 days. On a year-over-year basis, estimates suggest growth of 7.6% for 2019 and 9.9% for 2020.

Harsco Corporation Price and Consensus