UPDATE 1-Harsco boosts balance sheet through infrastructure unit deal

Mon Sep 16, 2013 12:07pm EDT

* To get 29 pct stake in company to be formed through deal

* Stake in new company valued at about $225 mln

* Says deal to add to earnings in first year after close

* Says to record deal-related non-cash charge of $350-$450 mln in third qtr

* Shares up 5 pct

Sept 16 (Reuters) - Engineering services provider Harsco Corp, seeking to strengthen its balance sheet, said it would merge its infrastructure business with Brand Energy & Infrastructure Services Inc for $300 million and a 29 percent stake in the combined entity.

Shares of Harsco, whose revenue fell 7 percent in 2012, rose 5 percent in morning trading on the New York Stock Exchange.

Clayton, Dubilier & Rice will buy Harsco's infrastructure business and merge it with Brand Energy, which the private equity firm is buying from First Reserve Corp.

The combined company's equity valuation of about $800 million values the 29 percent stake at $225 million, Harsco said.

Harsco said it expected the new company to have pro forma annual revenue of nearly $3 billion. About two-thirds of revenue was expected from maintenance work in the energy sector.

Harsco's infrastructure business, which contributed 31 percent to total revenue in 2012, provides services such as concrete forming and painting, renting and selling scaffolding, and insulation to builders and contractors.

"..(The deal) immediately strengthens the financial profile of the company while providing the financial flexibility to pursue higher return, higher growth opportunities," Chief Executive Patrick Decker said in a statement on Monday.

Camp Hill, Pennsylvania-based Harsco said it expected the deal to add to earnings in the first year after the transaction closes.

The company will record a non-cash charge of between $350 million and $450 million to write down the book value of the infrastructure business, Chief Financial Officer Nicholas Grasberger said on a conference call with analysts.

Robert W. Baird & Co. and Credit Suisse were the financial advisers to Harsco, while Weil, Gotshal & Manges acted as legal advisers.

Morgan Stanley, Citi, Goldman Sachs & Co and UBS Investment Bank were financial advisers to Clayton, Dubilier & Rice.

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