Acquisitions

3 Months Ended

Aug. 31, 2025

Business Combination [Abstract]

Acquisitions

Note 12 – Acquisitions

Sitem Group (Fiscal 2026)

On June 3, 2025, Tempel completed its acquisition of 52% of the Sitem Group. The Sitem Group produces electric motor laminations and accessory products primarily for automotive and industrial applications in Europe.

The total purchase price to be paid by Tempel in the Sitem Group acquisition consisted of the following:

(1)Stock acquired from shareholders of €43.1 million ($48.9 million)

(2)Cash capital contribution of €10.0 million ($11.3 million) related to the purchase for newly issued shares, of which €4.8 million ($5.4 million) is attributable to minority interest, and

(3)Contribution of Tempel’s electrical steel subsidiary in Nagold, Germany (“Tempel Nagold”), which was valued at €22.0 million ($25.0 million) at the time of acquisition, of which €10.6 million ($12.0 million) is attributable to minority interest.

The cash consideration included cash that is contingent on certain customary conditions, of which €4.2 million ($4.7 million) relates to the purchase of existing shares and €0.6 million ($0.7 million) relates to the purchase of newly issued shares. The acquisition was funded primarily with restricted cash held in escrow at May 31, 2025. The difference between the contributed fair value of Tempel Nagold at the time of the acquisition and the noncontrolling interest in Tempel Nagold, which was at the Company’s historical cost, was $0.7 million and was recorded as an adjustment to APIC.

As of the first quarter of fiscal 2026, total acquisition-related expenses, consisting primarily of legal, advisory, and valuation services were $5.0 million, of which $0.4 million was incurred in the first quarter of fiscal 2026. These costs are included in SG&A expense in the consolidated statement of earnings. There was a one-time bonus of €4.0 million ($4.6 million) that was paid to key individuals at the Sitem Group as a result of the successful closing, which was recorded in SG&A expense in the consolidated statement of earnings. There was a deferred tax asset adjustment of €0.7 million ($0.8 million) related to the disallowance of deferred tax assets located within Germany as a result of the contribution of Tempel Nagold. This adjustment was recorded in income tax expense in the consolidated statement of earnings.

The Sitem Group transaction includes a series of put options and call options. The net put/call was valued at €9.4 million ($10.7 million) using a Monte Carlo simulation in a risk-neutral framework and is recorded within Mezzanine Equity. The fair value of the remaining noncontrolling interest of 48% after the acquisition was determined using the implied enterprise value based on the purchase price. For additional information, see “Note 9 – Mezzanine Equity.”

The following table summarizes the consideration transferred and the estimated fair value assigned to the assets acquired and liabilities assumed at the acquisition date. These amounts reflect various preliminary fair value estimates and assumptions, including preliminary work performed by a third-party valuation specialist, and are subject to change within the measurement period as the valuation is finalized. The primary areas of preliminary purchase price allocation subject to change relate to the valuation of acquired tangible assets and liabilities, identification and valuation of residual goodwill and tax effects of acquired assets and assumed liabilities.

(In millions)	Preliminary Valuation
Consideration Transferred
Cash Consideration	$	44.2
Contingent Consideration - Cash		4.7
Subtotal		48.9
Cash Capital Contribution		5.1
Contingent Capital Contribution - Cash		0.3
Subtotal		5.4
Contribution of Tempel’s electrical steel subsidiary in Nagold, Germany		12.0
Total Consideration Transferred	$	66.3
Recognized amounts of identifiable assets acquired and liabilities assumed
Cash and cash equivalents	$	42.6
Receivables		39.6
Inventories		40.4
Deferred income tax assets		3.2
Prepaid expenses		4.9
Operating lease right-of-use assets		16.5
Finance lease right-of-use assets		8.6
Property, plant and equipment		98.8
Intangible assets		24.0
Other Assets		1.0
Total identifiable assets		279.6
Accounts payable		(34.7	)
Accrued compensation and related taxes		(9.3	)
Current operating lease liabilities		(2.7	)
Current finance lease liabilities		(2.4	)
Noncurrent operating lease liabilities		(13.9	)
Noncurrent finance lease liabilities		(6.2	)
Current maturities of long-term debt and short-term debt		(25.9	)
Deferred income tax liabilities		(16.9	)
Long-term debt		(25.3	)
Pension and other postretirement benefit obligations		(14.3	)
Other non-current liabilities		(1.9	)
Total identifiable liabilities		(153.5	)
Sitem Group - Net identifiable assets		126.1
Goodwill		22.0
Total - Sitem Group		148.1
Redeemable noncontrolling interest - Net Put option		(10.7	)
Redeemable noncontrolling interest		(71.1	)
Total - redeemable noncontrolling interest		(81.8	)
Total	$	66.3

In addition to the redeemable noncontrolling interest above of $81.8 million, the Company recorded $17.4 million of redeemable noncontrolling interest related to the cash capital contribution and the contribution of Tempel Nagold.

The Company recognized goodwill related to this acquisition of $22.0 million, which is not expected to be deductible for income tax purposes. The goodwill recognized in this acquisition was attributable to the acquired assembled workforce, expected synergies, expanded market opportunities, and economies of scale, none of which qualify for recognition as a separate intangible asset.

Acquired intangible assets are being amortized over the estimated useful lives on a straight-line basis. The following table summarizes the purchase price allocation and weighted average remaining useful lives for identifiable intangible assets acquired as of the acquisition date:

			Weighted Average
(In millions)			Estimated Useful	Valuation
Category	Amount		Life (Years)	Methodology
Customer relationships	$	12.3	13	Multi-period Excess Earnings Method
Technological know-how		7.7	8	Relief-from-Royalty Method
Favorable right-of-use lease asset		2.7	7	Discounted Cash Flow Method
Software		1.3	3	Cost
Total acquired identifiable intangible assets	$	24.0

Operating results of the Sitem Group have been included in our consolidated statement of earnings since June 3, 2025, the date of acquisition. The Sitem Group is reported on a one-month lag. During the first quarter of fiscal 2026, the Sitem Group contributed net sales of $39.4 million and net loss attributable to Worthington Steel of $3.0 million.

The following unaudited pro forma information presents consolidated financial information as if the Sitem Group had been acquired at the beginning of fiscal 2025. Depreciation and amortization expense included in the pro forma results reflect the preliminary acquisition-date fair values assigned to the definite-lived intangible assets and fixed assets of the Sitem Group assuming a June 1, 2024 acquisition date. Adjustments have been made to remove acquisition-related costs and the acquisition date fair value adjustment to acquired inventories. The pro forma adjustments noted below have been adjusted for the applicable income tax impact. The pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on June 1, 2024.

	Three Months Ended
	August 31,		August 31,
(In millions, except per share amounts)	2025		2024
Net Sales	$	872.9	$	884.7
Net earnings attributable to Worthington Steel	$	36.9	$	27.7
Diluted earnings per share attributable to Worthington Steel shareholders	$	0.73	$	0.55