Eagle Pacific Industries Announces Major Acquisition

Business Wire, July 29, 1999

MINNEAPOLIS--(BUSINESS WIRE)--July 29, 1999--

Eagle Pacific Industries, Inc. (Nasdaq SmallCap: "EPII") today announced that it has signed a letter of intent with Mitsubishi Chemical America, Inc. to acquire all of the outstanding capital stock of Pacific Western Extruded Plastics Company (PWPipe). Closing of the transaction is subject to certain regulatory consents, obtaining satisfactory financing and other conditions. Eagle Pacific anticipates that the closing will take place in the third quarter 1999.

Together, Eagle Pacific and PWPipe will be the largest producer of polyvinyl chloride (PVC) pipe in the western United States, the second largest manufacturer of PVC pipe in the United States and the largest merchant buyer of PVC resin in the United States. In the twelve months ended June 30, 1999, the combined businesses sold nearly 600 million pounds of plastic pipe to customers in 41 states and generated combined revenues of $269.1 million and earnings before interest, taxes, depreciation and amortization (EBITDA) of $34.5 million.

Eagle has agreed to pay $80 million for PWPipe, subject to certain balance sheet adjustments, using a combination of senior secured debt and senior subordinated notes with warrants to fund the acquisition. Eagle Pacific has retained Donaldson, Lufkin & Jenrette Securities Corporation to assist in obtaining financing for the transaction. The company anticipates that the dilution from the issuance of the warrants in connection with the transaction will be less than 20 percent of the currently outstanding shares of common stock and expects that the acquisition will be immediately accretive to earnings.

Eagle Pacific operates three manufacturing facilities located in Hastings, Nebraska, Hillsboro, Oregon and West Jordan, Utah. PWPipe operates six manufacturing facilities located in Tacoma and Sunnyside, Washington, Eugene, Oregon, and Cameron Park, Visalia and Perris, California. The products of the combined companies include plastic pipe and tubing for agricultural and turf irrigation, water wells and municipal water distribution, drainage and sewers, commercial and industrial plumbing, natural gas and water wells, electrical conduit and fiber optic/electronic/telephone lines.

Eagle Pacific Chief Executive Officer William H. Spell commented, "The acquisition of PWPipe will reaffirm our strategy of targeted growth and our determination to continue to be an industry leader. In the last five years the two companies have spent approximately $45 million in capital improvements to become low-cost, efficient producers and both are currently reaping the benefits of those expenditures. The addition of the PWPipe management group will add significant experience and depth to our management team while the combination of these two strong businesses will position the company for continued growth and profitability in the future."

The purchase is contingent upon certain governmental approvals and financing and Eagle Pacific expects to meet both conditions in the next 45 days. Since no shareholder meeting is required, the company anticipates concluding the transaction in the third quarter.

The Chief Executives Officer's statement that the acquisition will position the combined companies for continued growth and profitability and other statements in this release contains forward looking statements that reflect risks and uncertainties that could cause actual results to differ materially from expectations. Factors that could cause actual results to differ materially from expectations include, but are not limited to, the following: delays in delivery and assembly of new manufacturing equipment, unexpected construction delays, raw material cost fluctuations, reduction in the construction of new homes, and competition.