AMPAC is selling its aerospace business after deciding it lacked the “horsepower” to grow both it and the pharmaceutical unit.
Selling the In-Space Propulsion unit to Moog Inc for $46m (€37m) will help American Pacific (AMPAC) to cut its net debt and increase focus on its pharmaceutical ingredients supply and services business.
Joseph Carleone, CEO of AMPAC, told investors: “It became clear that AMPAC did not have the horsepower to adequately support both the pharmaceutical chemicals play and the aerospace play at the same time.”
In the second quarter of 2012 operating profit at the aerospace unit dropped by almost 100 per cent, continuing the downwards trend seen in the first three months of the year. AMPAC thinks there are opportunities to grow the aerospace business but the support of a bigger organisation is needed.
Carleone said: “Achieving this next level of growth…will require support from a much larger player in the aerospace business. Therefore we decided to monetise our investment in the satellite propulsion business to support the focused pursuit of the pharmaceutical business.”
AMPAC expects the deal to close before its fiscal year ends on September 30. After expenses and tax AMPAC will gain $36m to $38m, $4m of which will stay in an escrow account for 15 months to cover any claims made against retained liabilities.
The company is yet to decide exactly how it will use the sale proceeds but Carleone spoke of cutting total debt by retiring notes and replacing them with lower interest rate borrowings. At the same time AMPAC is keen to retain access to funds to expand its pharmaceutical business.
Carleone said: “In effect, we reduce total debt and total interest commitments. Of course, we would want to maintain flexibility in our structure to allow for growth of the business, especially in the pharmaceuticals area.”