IPO Overview: Globe Specialty Metals

Jul.28.09 | About: Globe Specialty (GSM)

Globe Specialty Metals (NASDAQ:GSM) is expected to go public this week. The company produces silicon metal, silicon-based alloys and is developing upgraded metallurgical silicon for the photovotaic market.

Business Overview (from prospectus)

We are one of the world’s largest and most efficient producers of silicon metal and silicon-based alloys, with approximately 156,400 MT of silicon metal capacity and 72,800 MT of silicon-based alloys capacity at our principal operating facilities located in the U.S., Argentina and Brazil, and are also a leading developer of upgraded metallurgical silicon (UMG) for photovoltaic (solar) cells. The capital expenditure required to reopen our Niagara Falls, New York facility was substantially completed in fiscal 2009 and will bring our silicon metal capacity to 186,400 MT. According to CRU International Limited (CRU), a leading independent research firm on the metals industry, we currently have approximately 77% of total U.S. capacity, approximately 61% of total North American capacity, and approximately 18% of total “Western World” capacity for silicon metal. CRU defines “Western World” as all countries supplying or consuming silicon metal with the exception of China and the former republics of the Soviet Union, including Russia. In addition to our principal silicon metal products, we produce high-grade silicon-based alloys including magnesium-ferrosilicon-based alloys used to make ductile iron by increasing iron’s strength and resilience, ferrosilicon-based alloys used to increase the strength and castability of grey and ductile iron, and calcium silicon used in steel manufacturing, particularly in modern continuous casting processes. Our silicon metal and silicon-based alloys are important inputs to manufacture a wide range of industrial products, including aluminum, silicone compounds used in the chemical industry, ductile iron, automotive parts, photovoltaic (solar) cells, semiconductors and steel. Finally, we capture, recycle and sell the majority of the by-products generated in our production processes which not only reduces manufacturing costs, but also significantly reduces the environmental impact of our operations.

Offering: 14.0 million shares at $7 - $9 per share. Net proceeds of approximately $40,164,000 will be used for for capital expenditures intended to improve operating efficiencies. The remainder of the net proceeds from this offering will be utilized to fund ongoing operating and working capital requirements, as well as for other general corporate purposes.

Lead Underwriters: Credit Suisse, Jefferies, J.P. Morgan

Financial Highlights: Net sales for our reportable segments for the nine months ended March 31, 2009 was $344,610,000 compared to $316,751,000 the nine months ended March 31, 2008... Cost of sales for our reportable segments for the nine months ended March 31, 2009 was $257,714,000 compared to $251,378,00 in the nine months ended March 31, 2008 an increase of 2.5%... Gross margin represented approximately 25% of sales in the nine months ended March 31, 2009 compared to approximately 21% of sales for the same period in 2008. This is an improvement in gross margin of approximately 19%, primarily reflecting higher average selling prices only partially offset by higher power costs, inventory write-downs, and lower capacity utilization.


Our primary competitors are Elkem AS, owned by Orkla ASA, and Grupo Ferroatlantica S.L. In addition, we also face competition from other companies, such as, Becancour Silicon, Inc., Rima Industrial SA and Ligas de Alumino SA as well as producers in China and the former republics of the Soviet Union. We have historically proven to be a highly efficient low cost producer, with competitive pricing and manufacturing processes that capture most of our production by-products for reuse or resale. We also have the flexibility to adapt to current market demands by switching between silicon-based alloy and silicon metal production with reasonable switching costs.

Additional Resources: