NEW YORK Northwest Pipe Co. has sold its oil country tubular goods (OCTG) assets in Bossier City, La., and Houston to Centric Pipe LLC, an affiliate of energy tubulars trading firm SB International Inc., for $42.7 million.
"Theyre focusing on line pipe and water transmission, where they have better competitive advantages, and by removing OCTG they will see more of the fruits of their labor. ... Looking at the (merger and acquisition) side, theyre focused on the water side of the ledger," Gerard J. Sweeney, equity analyst at New York-based Boenning & Scattergood Inc., told AMM.
"This divestiture will enable us to increase our focus on growing our core water transmission business, while placing these assets in the hands of an experienced OCTG company with global relationships," president and chief executive officer Scott Montross said in a statement.
The two companies were said to be in the final stages of talks March 28 (amm.com, March 28). Vancouver, Wash.-based Northwest Pipe had said in October that it was looking at options for its OCTG business as it focused on its water transmission and line pipe segments (amm.com, Oct. 1).
Northwest Pipe will retain ownership of the Houston facilitys property, which it will lease to SB International with an option for SB to purchase it at a later date, the company said.
Dallas-based SB International, led by president and chief executive officer Satish Gupta, started distributing OCTG and line pipe in 2004 and has more than 30 years of steel distribution experience.
"This announcement in no way affects the companys commitment to and continued investment in our Atchison, Kan., line pipe facility, which is on schedule to complete a major expansion project," Montross added.
Market sources anticipate little immediate impact from the sale, as the two assets are said to be relatively small in terms of production volume. However, some were surprised that a trading company was making a jump into production.
The age of the two mills could be a challenge for the new operator though, one source said. "Both (of) those facilities are older facilities. I dont think theyre nearly the most efficient," he added.
Northwest Pipe recently recorded a noncash impairment charge of $27.5 million for property and equipment at Bossier City (amm.com, March 17). The company noted at the time that its OCTG segment, while growing in sales volume, has been crimped in terms of profitability due to an influx of imports and additional domestic capacity.
The Bossier City mills location could also be problematic, a southern distributor said. "Up there its out of the loop and they dont have any end-finishing facilities at all," he said.