Olin Exits Metals

Olin OLN announced Monday that it will sell its metal operations to an affiliate of KPS Capital Partners for $400 million. The price tag represents a multiple of just over 4 times the business' 2006 operating income before depreciation and amortization. The metal segment had struggled mightily over the past few years, squeezed between the soaring cost of copper and nickel and sluggish demand stemming from weak end markets in the North American housing and automotive sectors. Metals accounted for two thirds of Olin's 2006 sales and nearly half its asset base and earned an average return on assets of just over 6% during the past two years. Given the stiff headwinds facing the division and its lack of synergies with Olin's core chlor alkali operations, we view this move favorably. However, we're not positive that the firm got the best price it could for its shareholders. We are placing our fair value estimate under review as we take a closer look at the economics of the deal.