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GrafTech signs letters of intent with BAM for preferred equity investment and tender offer

GrafTech International has signed a letter of intent regarding the potential sale of USD150 million of 7 per cent convertible preferred shares in a private offering to an affiliate of alternative asset manager Brookfield Asset Management (BAM).

GrafTech has also entered into a separate letter of intent for a possible tender offer by Brookfield to acquire outstanding shares of GrafTech common stock.

The first letter of intent contemplates that the convertible preferred shares would be issued in two series. One series would be immediately convertible into common shares equal to up to 19.9 per cent of the currently outstanding shares of common stock at a conversion price of USD5.00 per common share, subject to customary and anti-dilution adjustments. The other series is proposed on the same economic terms and would become convertible into common shares equal to up to 2.0 per cent of the currently outstanding shares upon approval by stockholders in accordance with New York Stock Exchange requirements. Upon receipt of such approval, the two series would be combined into one series. Upon issuance of the preferred shares, Brookfield would have the right to add two members to the Company’s Board.

“Over the last eighteen months, we have taken deliberate steps to position the Company for the long term and believe this transaction is another example of our continued commitment to positioning the Company for success,” said Joel Hawthorne, Chief Executive Officer of GrafTech. “We are pleased to partner with Brookfield, which has a long and proven track record of success and has demonstrated confidence in our strategic plan and prospects. Brookfield shares our focus on executing a strategy that will allow GrafTech to manage through intensifying industry challenges in preparation for a cyclical upturn. While we continue to face considerable industry challenges, we have made significant progress in delivering differentiated products to customers, optimizing our portfolio and efficiently managing costs, and we are committed to achieving these objectives.”

Mark Weinberg, Managing Partner, Brookfield Private Equity, says: “We are pleased to make this equity investment in GrafTech, tangible evidence that reflects our strong endorsement of the Company’s leadership, business plan and underlying asset quality. We have had the opportunity to do financial and operational due diligence including site visits to the majority of the Company’s plants. From our perspective as an owner of many businesses, including steel manufacturing, we observed operational efficiencies being achieved through GrafTech’s Lean Manufacturing management system, passionate management, engaged employees, a flat organisational structure and a keen sense of what drives long-term value in the graphite business. We look forward to a long and rewarding relationship with the Company.”

The second letter of intent contemplates a potential tender offer by Brookfield to purchase up to all of the outstanding shares of GrafTech common stock at a purchase price of USD5.05 per share, representing a proposed premium of 26 per cent based on the average closing price of the Company's common shares during the 60 trading days ended 28 April, 2015. Acceptance of and payment for shares tendered would be conditioned on at least approximately 15 per cent of the outstanding shares of GrafTech common stock being tendered and not withdrawn. If more than approximately 75 per cent of the outstanding shares of common stock are tendered and not withdrawn, it is expected that the remaining shares would be acquired in a merger transaction at the same price.

The potential tender offer, if it occurs, is intended to provide GrafTech stockholders the option to choose immediate liquidity at a premium or to participate in GrafTech as a stockholder following the closing of the tender offer (subject to the tender offer provisions) with the benefit of Brookfield sponsorship going forward. If the tender offer occurs, a stockholder might choose to accept a combination of both cash and continued ownership of GrafTech shares.

The Company believes that Brookfield has an exceptional track record sponsoring public companies in difficult underlying market conditions, including significant knowledge and experience in steel, mining and metals, and other industrial sectors.

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