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NN announces sell of PBC Group, which includes Erwin plant, for $375M

NN, Inc. plant in Erwin is part of a division being sold to a Japanese precision ball company. The $375 million deal is expected to be completed later this year. (Erwin Record Staff Photo by Keeli Parkey)

By Brad Hicks

The Johnson City-headquartered NN, Inc., announced Monday that it intends to sell a division of its business to a Japanese precision ball company, a move that may impact NN’s Erwin plant.

According to a release issued Monday morning by NN, the company has entered into a definitive agreement to sell its Precision Bearing Components Group (PBC) to Tsubaki Nakashima Co., Ltd. for $375 million in cash.

The transaction is expected to be completed in the second half of 2017 and is subject to regulatory and customary closing conditions, according to the release.

“The sale of PBC furthers NN’s long-term strategy to build a diversified industrial business with a comprehensive geographic footprint in attractive high-growth market segments,” the NN release states. “NN plans to redeploy the estimated $270 million in net proceeds from the transaction into higher-growth, higher-margin end markets, while also accelerating its focus on deleveraging.”

NN, Inc., founded in 1980, is a global manufacturer of high precision metal and plastic components and assemblies, according to the company’s website. The company employees more than 5,400 workers at 40 manufacturing facilities located throughout the world. Along with its PBC, NN, Inc.’s other business units include its Autocam Precision Components Group and its Precision Engineered Products Group.

Eight of NN, Inc.’s facilities are involved with its PBC, including its plants located in Erwin and Mountain City.

“The sale of PBC represents a key strategic step toward building a diversified industrial business and capitalizing on growth opportunities that foster strong operating performance, stable earnings and free cash flow over the long term,” NN, Inc. President and CEO Richard Holder stated in the company’s release announcing the sale. “This transaction further balances our portfolio and provides us with the capital to execute on our strategic expansion into the higher-growth, medical and aerospace end markets. Importantly, we will also strengthen our balance sheet and will now have the additional flexibility through cash on hand to make strategic acquisitions in markets that we believe have strong growth potential. We will continue to look for opportunities to further diversify our business and create a more balanced portfolio to enhance shareholder value over the long term. Finally, we believe that Tsubaki Nakashima is the right strategic fit for PBC, its employees and its customers. By joining with Tsubaki Nakashima, well-respected bearing components manufacturer with an established track record of global growth, PBC will continue to thrive.”

Officials with NN, Inc. could not be reached Monday for comment. However, Northeast Tennessee Regional Economic Partnership CEO Mitch Miller stated in a Monday email that with the purchase of NN Inc.’s PBC Group, Tsubaki Nakashima will “occupy/operate” NN Inc.’s manufacturing facilities in Erwin and Mountain City. Tsubaki Nakashima will also co-locate its North American headquarters in Johnson City alongside NN’s corporate headquarters, Miller said.

“We are excited to welcome Tsubaki Nakashima to Northeast Tennessee and look forward to working with them to grow their North American presence here in our Region,” Miller wrote.

Miller also wrote that NN “has been a great corporate citizen here in our Region and we look forward to continued growth of their corporate headquarters in Johnson City.”

According to the purchase agreement filed Monday with the U.S. Securities and Exchange Commission, Tsubaki Nakashima is to review and evaluate each acquired company employee for “continued employment opportunities with the Acquired Companies and/or Purchaser following the Closing whether in connection with the Acquired Business or otherwise.”

The agreement states that for 12 months following the transaction’s closing, Tsubaki is to provide each acquired employee with an annual base salary or wage rate that is the same or greater than his or her annual base salary or age in effect immediately prior to the closing, as well as annual cash incentive compensation opportunities and health and medical benefits comparable to any made available by NN.

According to its website, Tsubaki Nakashima, founded in 1936, is involved in the manufacturing and sale of industrial precision balls used for bearing and other applications, as well as the manufacturing and sale of ball screws and large-scale blowers.

Tsubaki Nakashima is the same company that in 1990 acquired the assets of the Hoover Ball and Bearing Company’s ball products division, leading to the formation of the Hoover Precision Products, Inc. subsidiary.

In 2007, the Hoover Ball plant in Erwin, where Hoover’s ball operations were moved to in 1959, and the company’s Connecticut facility, were consolidated and transferred to the company’s Georgia facility, resulting in the closure of the local Hoover Precision Products plant.