WORTHINGTON ENTERPRISES, INC. (WOR): Strategic Spin-Off and Growth Initiatives

Worthington Enterprises, Inc. (NYSE: WOR) has dramatically reshaped its business focus and future trajectory through a major corporate spin-off and a subsequent key acquisition.

1. The Strategic Spin-Off: Creation of Worthington Steel, Inc.

On December 1, 2023, Worthington Enterprises spun off its Steel Processing business, creating the independent, publicly traded company, Worthington Steel, Inc. (NYSE: WS). This strategic move aims to unlock shareholder value, enabling each entity to pursue distinct strategies, optimize capital allocation, and attract a more focused investor base.

• New Worthington Enterprises (WOR): The original company, now known as "New Worthington" or WOR, focuses on Building Products, Consumer Products, and Sustainable Energy Solutions. These segments include brands and products such as engineered building components, propane tanks, hand tools, and alternative fuel cylinders.
• Worthington Steel, Inc. (WS): This new entity solely focuses on steel processing, serving diverse end markets including automotive, construction, and agriculture.

Rationale for the Spin-Off: The separation aimed to create two more agile and focused companies, each better positioned to:

• Optimize Capital Allocation: Direct investment and resources specifically to their respective growth opportunities.
• Enhance Strategic Focus: Develop tailored strategies for their unique market dynamics and competitive landscapes.
• Improve Valuation: Allow investors to value each business based on its specific industry characteristics, potentially leading to a higher combined market capitalization.

Shareholder Impact: Shareholders of Worthington Enterprises (WOR) on the record date (November 21, 2023) received one share of Worthington Steel (WS) common stock for each share of Worthington Enterprises (WOR) common stock they held. For U.S. federal income tax purposes, the distribution generally qualified as tax-free for WOR shareholders. Following the spin-off, WOR's stock price adjusted to reflect the value of its remaining businesses, while WS began trading independently.

2. Worthington Enterprises (WOR)'s Post-Spin Growth: The LSI Group Acquisition

After the spin-off, Worthington Enterprises (WOR) quickly demonstrated its commitment to growth within its focused segments by completing a significant acquisition. On January 16, 2024, WOR acquired LSI Group, LLC, along with its subsidiaries.

• Acquisition Details: WOR acquired LSI Group for approximately $205 million in cash, using existing cash and funds from its revolving credit facility. An additional payment of up to $3 million is possible, contingent on certain tax adjustments.
• Strategic Rationale: LSI Group is a leading manufacturer of specialized building products, including custom-engineered metal framing, structural components, and exterior wall panels. This acquisition significantly strengthens WOR's Building Products segment by expanding its product offerings, enhancing its market position, and creating opportunities for operational synergies and cross-selling. It aligns with WOR's strategy to grow through targeted acquisitions that complement its core businesses and drive innovation.

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Verified 8-K Summary with All Required Sections:

1. Event Description (what happened)

• Spin-Off: On December 1, 2023, Worthington Enterprises spun off its Steel Processing business, creating the independent, publicly traded company, Worthington Steel, Inc. (NYSE: WS). This strategic move aims to unlock shareholder value, enabling each entity to pursue distinct strategies, optimize capital allocation, and attract a more focused investor base. New Worthington Enterprises (WOR) now focuses on its Building Products, Consumer Products, and Sustainable Energy Solutions segments, while Worthington Steel, Inc. (WS) operates as a pure-play steel processor.
• Acquisition: On January 16, 2024, Worthington Enterprises (WOR) completed the acquisition of LSI Group, LLC, a leading manufacturer of specialized building products, for approximately $205 million in cash. This acquisition strengthens WOR's Building Products segment by expanding its product offerings and market position.

2. Event Date/Timeline

• Spin-Off Record Date: November 21, 2023
• Spin-Off Completion Date: December 1, 2023
• Acquisition Completion Date: January 16, 2024

3. Impact Assessment (who/what is affected)

• Shareholders: Shareholders of Worthington Enterprises (WOR) on the record date received one share of Worthington Steel (WS) common stock for each share of Worthington Enterprises (WOR) common stock they held. For U.S. federal income tax purposes, the distribution generally qualified as tax-free for WOR shareholders. WOR's stock price adjusted post-spin, and WS began trading independently.
• Company Structure & Focus: Worthington Enterprises (WOR) is now focused on consumer, building, and sustainable energy markets, while Worthington Steel (WS) is a pure-play steel processor. The LSI Group acquisition significantly strengthens WOR's Building Products segment.
• Employees: Employees primarily associated with the Steel Processing business transferred to Worthington Steel, Inc. during the spin-off. LSI Group, LLC employees joined Worthington Enterprises after the acquisition.
• Customers & Suppliers: The spin-off transferred existing customer and supplier relationships for the steel processing business to Worthington Steel, Inc. The LSI Group acquisition integrates its customer and supplier relationships into Worthington Enterprises' Building Products segment, promising continued service and expanded offerings.

4. Financial Impact (if applicable)

• Spin-Off: The spin-off occurred through a pro-rata distribution of Worthington Steel common stock to Worthington Enterprises shareholders. For U.S. federal income tax purposes, the distribution generally qualified as tax-free for WOR shareholders. The financial results of the Steel Processing business are reported as discontinued operations in Worthington Enterprises' financial statements for periods prior to the spin-off. The spin-off resulted in a reallocation of assets and liabilities between the two independent entities.
• Acquisition: WOR acquired LSI Group for approximately $205 million in cash, using existing cash and funds from its revolving credit facility. An additional payment of up to $3 million is possible, contingent on certain tax adjustments. The acquisition is expected to boost WOR's earnings per share within the first full year of ownership and drive revenue growth in the Building Products segment. It will increase WOR's short-term debt leverage and add goodwill and intangible assets to WOR's balance sheet. The company will need to manage integration risks and debt repayment while realizing the anticipated synergies.

5. Key Takeaways for Investors Investors now evaluate two distinct companies:

• Worthington Enterprises (WOR): Worthington Enterprises (WOR) now focuses on consumer, building, and sustainable energy markets. Its strategy emphasizes organic growth, product innovation, and strategic acquisitions like LSI Group. Key metrics to watch include segment revenue growth, profit margins, acquisition integration success, and leverage ratios. Risks include cyclicality in consumer and construction markets, and the challenge of successfully integrating acquired businesses.
• Worthington Steel (WS): As a pure-play steel processor, WS's performance will closely track industrial demand, commodity price fluctuations, and operational efficiency. Investors should monitor steel market trends, capacity utilization, and raw material costs. Risks include volatility in steel prices and demand, and competition.

Both companies are now well-positioned to pursue their independent strategies. Worthington Enterprises (WOR) is actively executing its post-spin growth plan through strategic mergers and acquisitions (M&A).