By Len Boselovic, Pittsburgh Post-Gazette

Mar. 17--Kennametal said yesterday the $349.5 million sale of its distribution business will allow it to accelerate plans to shift more of its manufacturing operations to high growth markets.

The Latrobe toolmaker will record a $3.25-per-share gain on the sale of its J&L Industry Supply unit to MSC Industrial Direct of Melville, N.Y. The sale is expected to close in the company's fourth fiscal quarter, which ends June 30.

J&L had operating income of $27.1 million on sales of $257.5 million in the fiscal year ended June 30. The company sells metal cutting tools, abrasives, hand and power tools and related products.

President and Chief Executive Officer Carlos M. Cardoso said the sale would allow Kennametal to focus on its core manufacturing business and expand relationships with other distributors.

Kennametal will use some of the proceeds to move manufacturing jobs to markets where the demand is. Spokeswoman Joy Chandler said the initiative is aimed at better meeting the needs of customers in markets that are growing.

"It's not about taking stuff out of North America to other places," she said.

Kennametal expects rationalizing production will cost 55 cents to 70 cents per share, but that the expense should be recovered in less than three years.

Remaining proceeds will be used for acquisitions, to repurchase shares and debt reduction. Mr. Cardoso said the company expects to redeem limited amounts of its debt because its investment grade credit rating and cash flow generation remain strong. Raising the company's dividend, currently set at 19 cents per quarter, was not mentioned.

Kennametal shares reached a 52-week high of $61.62 shortly after the announcement. They finished yesterday at $61.37, up 58 cents.

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Source: Pittsburgh Post-Gazette

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