Exhibit 99.1 Exhibit 99.1• | Diversification: Product line and end market diversification will help mitigate the volatility of earnings inherent in manufacturing business cycles. USAP is heavily reliant on the aerospace market and, while currently strong, will experience a peak. SYNL has greater exposure to the energy markets, which have been depressed in recent years, but will continue to rebound and have considerable upside. Additionally, SYNL’s acquisition of ASTI has added several consumer-oriented markets such as boats, motorcycles, high-end autos, and RV’s, to help offset the less predictable industrial markets. USAP’s semi-finished product lines provide limited exposure to metal prices, helping to offset the nickel price volatility in SYNL’s stainless steel pipe business. |
• | Synergies: The potential synergies from a merger are substantial: |
– | Procurement savings from consolidating freight, manufacturing supplies, insurance and other expense items are conservatively estimated to be $3 to $4 million annually. |
– | Corporate savings from elimination of redundant public company and administrative costs are estimated to be $2 to $3 million annually. |
– | Virtuous inventory cycle whereby USAP will be able to provide raw materials to SYNL, and SYNL processes will generate scrap materials that can be utilized by USAP, providing $1 to $2 million in annual savings. |
• | Cost of Capital and Shareholder Liquidity: The pro forma company offers several key advantages to our shareholders: |
– | A larger market capitalization will afford greater liquidity in trading, less volatility in the share price, greater interest from institutional shareholders, and access to sell side sponsored research analysts. |
– | A stronger balance sheet, including further improvements resulting from certain capital allocation opportunities (discussed below), will position the company for substantial growth through the ability to pursue much larger acquisitions. |
– | Improved scale, diversification across multiple end markets, liquidity and further concentration in the Metals sector will lower borrowing costs and position the pro forma company for multiple expansion. |
• | Superior Management Team and Employees: The pro forma company will benefit from a deeper bench of management talent and more effectively leverage the opportunities presented by a larger platform. |
– | A tenured management team with heavy operating experience will drive continuous improvements in the pro forma company, as best practices are shared across the business units. |
– | M&A experience will support further growth through a strategy of accretive acquisitions. |
– | The greater depth of the senior management team will provide the pro forma company with expanded options for succession planning. |
– | USAP shareholders will own approximately 52% of NEWCO and SYNL shareholders will own approximately 48%. |
– | NEWCO board will consist of an equal number of directors from both USAP and SYNL. |
– | Denny Oates, current Chairman of the Board, CEO and President of USAP will serve as Executive Chairman of NEWCO and Craig Bram, current CEO and President of SYNL, will serve as CEO and President of NEWCO. |
– | The senior management team will include key members from both companies. |
– | NEWCO will pursue several capital allocation strategies, including a sale leaseback of USAP properties, the sale of non-strategic assets, and a reduction of working capital requirements for the combined business. |
– | Pro forma for the capital allocation strategies, we estimate NEWCO net debt will be less than $20 million and ABL borrowing capacity approaching $160 million. |
– | NEWCO will have annual revenue in a normalized demand year in excess of $500 million and adjusted EBITDA of $70 million. |
