Washington City Council members scheduled a special meeting for Wednesday afternoon to vote on amending the agreement with Valent Aerostructures for bonds to finance the company’s manufacturing plant in the Elmer Heidmann Industrial Park.
The Kansas City-based company was purchased earlier this month by aircraft parts manufacturer and engineering firm LMI Aerospace of St. Charles in a reported $247 million deal.
The sale caught Washington officials off guard.
“We knew nothing until we read it in the newspaper,” said Mayor Sandy Lucy at a special called council meeting last Friday morning.
In August 2010 the council authorized the issuance of up to $17.5 million in tax-exempt Chapter 100 bonds to build and equip the 85,000-square-foot facility.
There was a provision in the original agreement that any sale of the company would trigger a repeal of the bonds.
That sale breached the lease contract for the Chapter 100 bonds, which included 50 percent tax abatements on the building and equipment through 2022. That means the city has the opportunity to propose amendments before approving a new agreement.
During Friday’s meeting, City Counselor Mark Piontek presented members with three ordinances drafted the night before, but he said he didn’t feel comfortable with the council voting on them until they had a chance to read them and get answers if they have questions.
The council will meet at 4:30 p.m. Wednesday to consider the ordinances.
One of the main changes proposed is the addition of a provision which would allow the city to recover all the abated property taxes “from day one,” if the plant here would be closed, City Administrator Jim Briggs explained.
The proposed amended agreement also requires that the purchaser make a payment of $20,068 to the Washington Civic Industrial Corporation to cover expenses incurred during the process of building the facility and the transfer of ownership.
Piontek said that provision was omitted in the original performance agreement.
While LMI officials are not happy with the proposal, “they have no choice,” Briggs told the council.
“I want to be perfectly clear. There is no indication that Valent is leaving,” Piontek remarked. “This is all precautionary. We learned a lesson with Harman-Becker. We want to prevent that from happening again.”
The city issued Chapter 100 bonds for development of the Harman-Becker facility but omitted a provision on the tax abatements.
“Valent will continue to exist but LMI will be the owner,” Piontek added.
Valent has 650 employees and several manufacturing, assembly and processing facilities including the Washington plant.
“We are excited to partner with LMI, they are a great company with a great reputation,” Perry Pecaut, general manager of the Valent Washington Division, told The Missourian after the sale was announced.
“We are also very excited about the opportunity and added capability this transaction will bring, in particular, large and complex sheet metal, stretch forming and design,” Pecaut said. “The transaction is desired by both LMI and Valent to fulfill our aligned vision.”
Pecaut said the Washington plant has approximately 163 employees.
The acquisition expands the St. Charles-based company’s machining expertise and commercial aerospace business.
LMI will pay $237 million to shareholders of privately held Valent and retain obligations of $9.7 million. Combined, the companies’ annual sales will total more than $480 million in 2013.
Machined parts and sub-assemblies for commercial aerospace companies accounted for 61 percent of Valent’s revenue in fiscal 2012, with defense, industrial and general aviation comprising the rest.
Valent makes parts for the Boeing 737 and Gulfstream G650, among other aircraft.
The deal, subject to regulatory approval, is expected to close by year’s end.