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AZZ Inc. (NYSE: AZZ), and Fernweh Group LLC ("Fernweh"), jointly announced today they have entered into a definitive agreement whereby AZZ will contribute its AZZ Infrastructure Solutions Segment1 ("AIS") to AIS Investment Holdings LLC (the "AIS JV"), and sell a 60% interest in the AIS JV to Fernweh at an implied enterprise value of AIS of $300 million. The valuation represents approximately 8.1x AIS LTM 2/28/2022 adjusted EBITDA2 of roughly $37 million and is expected to result in cash proceeds to AZZ of approximately $228 million, subject to certain customary purchase price adjustments. Under the terms of the transaction, the AIS JV will be governed by a board with three representatives from Fernweh and two representatives from AZZ. Following the close of the transaction, Fernweh will own 60% of the AIS JV and AZZ will own 40%. The transaction is expected to close before the end of 2022, subject to obtaining the requisite governmental approvals and other customary closing conditions and approvals.
AIS is a leading provider of specialized products and solutions designed to support industrial and electrical applications. AIS's product offerings include custom switchgear, electrical enclosures, medium and high voltage bus ducts, and explosion proof and hazardous duty lighting. In addition, AIS focuses on extension of life cycle for the power generation, refining and industrial infrastructure markets, through automated weld overlay solutions for corrosion and erosion mitigation. The AIS business has approximately 1,323 employees and operates through a global network of 20 strategically located manufacturing facilities. For fiscal year 2022, ended February 28, 2022, AIS generated sales of approximately $375 million.
In conjunction with the divesture of a majority stake in AIS and in accordance with generally accepted accounting principles, the Company is required to measure AIS at the lower of its carrying amount or fair value less costs to sell. The Company will complete this assessment in the second quarter of fiscal year 2023. The result of this assessment will be recorded as part of discontinued operations in the Company's financial statements, and on a future basis, it is expected the continued investment in AIS will be deconsolidated from the Company's financial statements and accounted for under equity method of accounting.
Tom Ferguson, Chief Executive Officer of AZZ, commented, "The agreement to divest a controlling stake in AIS to Fernweh represents the continued transition of AZZ into a focused industry leading provider of metal coating and galvanizing solutions. While this transaction provides AZZ with near-term cash, most importantly it also provides us an opportunity to participate in AIS' value creation journey as it strengthens its position in an attractive marketplace for its specialized products and services. I am confident Fernweh's management capability, operational and strategic transformation support and capital provides the needed catalysts for continued growth and expansion of AIS after a strong year of bookings and backlog growth. I want to thank the dedicated management team and employees at AIS for their numerous years of contributions to AZZ and wish them continued success as we enter this joint venture arrangement together."
"We are excited by the opportunity to acquire a majority stake in AIS and look forward to working with management to continue to strengthen and grow the business. The company has a range of strategic growth opportunities in energy, infrastructure, data center, and other sectors, as well as unique capabilities to support marquee customers in these end markets. The acquisition is aligned with Fernweh's investment thesis in the industrials sector and will be a strategic platform on which to build a major electrical and industrial business. We look forward to welcoming the AIS colleagues to the Fernweh family and establishing a long and fruitful partnership with Tom, and the AZZ team," said Nick Santhanam, CEO of Fernweh Group.
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