FAIRLAWN, Ohio, Sept. 22 /CNW/ -- FAIRLAWN, Ohio, Sept. 22 /CNW/ --
-- Significantly increases OMNOVA's total size and scale to sales
of over US$1 billion and Adjusted EBITDA of US$129 million, based
on last twelve months through May 2010. -- Enhances Performance
Chemicals segment's growth opportunities -- Broadens Performance
Chemicals' markets, applications and technologies -- Expected to be
accretive to earnings in 2012 -- Management conference call
scheduled for September 23 at 11am ET OMNOVA Solutions Inc. (NYSE:
OMN) today announced that it has entered into an agreement with AXA
Private Equity granting the Company a period of exclusivity to
acquire specialty chemicals manufacturer Eliokem International.
Closing of the proposed transaction is subject to consultation with
Eliokem's Works Council in France, completion of a definitive
agreement, regulatory approvals, financing and other customary
conditions. Subject to these conditions, the Company anticipates
completion of the transaction by the end of 2010. Under the
proposed transaction, OMNOVA will pay 227.5 million euros for
Eliokem, or approximately US$300 million at current exchange rates.
OMNOVA intends to raise US$425 million of new long term debt to
fund the transaction and the repayment of all existing OMNOVA and
Eliokem debt. In addition, OMNOVA intends to extend and increase
the size of its unused asset-based credit facility to US$100
million and expects to have US$40 million of cash at the closing of
the acquisition. The Company expects the transaction to be neutral
to slightly dilutive to earnings in 2011, but accretive in 2012.
"This acquisition will transform OMNOVA Solutions into a much
larger, more diverse specialty chemical and functional surfaces
company with significantly enhanced global capability," said Kevin
McMullen, Chairman and CEO of OMNOVA Solutions. "It is an excellent
fit with OMNOVA's strategy to grow in existing markets, penetrate
new adjacent markets and globalize our Company." Eliokem is a
worldwide producer of specialty polymers and chemicals, including
coating resins, elastomeric modifiers, antioxidants, rubber
reinforcing resins, oil and gas drilling chemicals, and latices for
specialty applications. Last twelve months sales and Adjusted
EBITDA through May 2010 were approximately US$268 million and US$50
million, respectively. Eliokem is headquartered in Villejust,
France (near Paris), and has manufacturing sites in Caojing and
Ningbo, China; Valia (Gujarat state), India; Le Havre, France; and
Akron (Ohio), USA. Eliokem also has regional sales offices in
Akron, Singapore, Shanghai, and Mumbai. The company employs about
630 people worldwide. OMNOVA plans to integrate Eliokem with its
Performance Chemicals segment, a business that has significantly
strengthened its competitive position and financial performance
over the past several years. Upon completion, the Eliokem
acquisition will provide OMNOVA with significant strategic
benefits: -- Globalization: Eliokem's presence in Asia, with over
40% of its sales in higher growth emerging markets, and with two
manufacturing sites in China and one in India, will accelerate
OMNOVA's strategy of growing its specialty chemicals platform in
this region. Asian sales for OMNOVA's Performance Chemicals segment
for the last twelve months through May 2010 were approximately
US$15 million. OMNOVA's chemical sales in Europe for the same
period were approximately US$30 million, primarily through alliance
manufacturing partners. Eliokem's manufacturing site in Le Havre,
France is well suited to enable improved growth of high margin
specialty chemicals. -- New Adjacent, Related Markets: Like OMNOVA,
Eliokem is focused on working very closely with its customers to
provide application- and customer-specific value added solutions.
Both companies have strong capabilities in polymer development and
manufacturing. While OMNOVA's primary focus has been on styrene
butadiene (SB) based latices, Eliokem's business will add
additional complementary technologies and applications to OMNOVA's
specialty chemicals portfolio. -- Cost Savings: Synergies are
expected to provide savings in manufacturing, logistics, purchasing
and SG&A by leveraging the resources of an integrated global
team. -- Higher Growth: The acquisition will provide OMNOVA with a
significant position in higher growth market segments and
applications, and improved access to the fastest growing regions of
the world through well-invested assets. OMNOVA's Performance
Chemicals business segment has led strong earnings growth for the
Company, contributing solid double-digit operating profit returns
over the last eight quarters. "Thanks to excellent work by our
business and technical support teams in Europe and Asia, OMNOVA's
chemicals business has continued to grow globally despite the fact
that we have had no Company-owned chemical manufacturing assets
outside the United States," McMullen pointed out. "The acquisition
of Eliokem will allow us to build on this momentum quickly and
significantly, and demonstrates our clear commitment to meet the
needs of our customers on a worldwide basis." Consistent with
OMNOVA's strategic emphasis on technical leadership and innovation,
the combined assets of OMNOVA and Eliokem will provide regional
research laboratories in North America, Europe, India and China.
New chemistries will enhance OMNOVA's strong portfolio, enabling an
even broader range of customer solutions. "The Eliokem product
lines will deepen our technology portfolios in markets we currently
serve, such as oil field and specialty latices, and will provide
exciting growth opportunities in new, but related markets with
brands that are already well known and respected," said Jim Hohman,
President of OMNOVA's Performance Chemicals business segment."
OMNOVA's Performance Chemicals segment has continued to grow in
2010. For the last twelve months ended May 2010, sales were US$466
million, and Adjusted EBITDA increased by 33%, to US$71 million.
The combination of OMNOVA and Eliokem will create a chemicals
business approaching US$750 million in annual sales, based on
results from the last twelve months through May 2010. Upon
completion of the transaction, and including OMNOVA's Decorative
Products business segment, OMNOVA Solutions will become a company
with over US$1 billion in sales - approximately 40% of which will
be outside the United States - and Adjusted EBITDA of approximately
US$129 million (based on last twelve months through May 2010
results). Conference Call - OMNOVA Solutions has scheduled a
conference call for Thursday, September 23, 2010, at 11:00am ET.
OMNOVA management will discuss the acquisition and key events
necessary for successful completion of the transaction. The call
may be accessed by the public from the Investors section of the
Company's website (www.omnova.com). Presentation slides will also
be available on the website at the time of the call. Webcast
attendees will be in a listen-only mode. Following the live
webcast, OMNOVA will archive the call and presentation slides on
its website until noon ET, October 14, 2010. A telephone replay
will also be available beginning at 1:00pm ET on September 23,
2010, and ending at 11:59pm ET on October 14, 2010. To listen to
the telephone replay, callers should dial: (USA) 800-475-6701 or
(Int'l) 320-365-3844. The Access Code is 172338. Non-GAAP Financial
Measures - This press release includes EBITDA and Adjusted EBITDA
which are Non-GAAP financial measures as defined by the Securities
and Exchange Commission. OMNOVA's EBITDA is calculated as income
(loss) from continuing operations less interest expense,
amortization of deferred financing costs, income taxes and
depreciation and amortization expense. OMNOVA's Adjusted EBITDA is
calculated as OMNOVA's EBITDA less restructuring and severance
expenses, asset impairments, non-cash stock compensation and other
items. Segment EBITDA is calculated as segment operating income
(loss) less interest expense, amortization of deferred financing
costs, income taxes and depreciation and amortization expense.
Segment Adjusted EBITDA is calculated as Segment EBITDA less
restructuring and severance expenses, asset impairments, non-cash
stock compensation and other items. Eliokem's EBITDA is calculated
as net income less interest expense, amortization of deferred
financing costs, income taxes and depreciation and amortization
expense. Eliokem's Adjusted EBITDA is calculated as Eliokem's
EBITDA less restructuring and severance expenses, asset impairments
and other items. EBITDA and Adjusted EBITDA are not measures of
financial performance under GAAP. EBITDA and Adjusted EBITDA are
not calculated in the same manner by all companies and,
accordingly, are not necessarily comparable to similarly titled
measures of other companies and may not be appropriate measures for
comparing performance relative to other companies. EBITDA and
Adjusted EBITDA should not be construed as indicators of the
Company's operating performance or liquidity and should not be
considered in isolation from or as a substitute for net income
(loss), cash flows from operations or cash flow data, which are all
prepared in accordance with GAAP. EBITDA and Adjusted EBITDA are
not intended to represent, and should not be considered more
meaningful than or as an alternative to, measures of operating
performance as determined in accordance with GAAP. Management
believes that presenting this information is useful to investors
because these measures are commonly used as analytical indicators
to evaluate performance and by management to allocate resources.
Set forth below are the reconciliations of these non-GAAP measures
to their most directly comparable GAAP financial measure. Non-GAAP
Financial Measures --------------------------- (LTM: Last 12 months
as of May 31, 2010) (Dollars in millions) LTM LTM Ended Ended May
31, May 31, 2010 2010 OMNOVA Solutions Consolidated --------
Eliokem International -------- ----------------
--------------------- Income (loss) from continuing $44.1 Net
Income $2.2 operations Interest expense 7.0 Interest expense 15.8
Amortization of deferred Amortization of deferred financing 0.6
financing 0.5 costs costs Income tax 2.6 Income tax 2.0
Depreciation & amortization 22.6 Depreciation &
amortization 13.5 ---- ---- EBITDA $76.9 EBITDA $34.0 Restructuring
& severance 0.7 Restructuring & severance 4.3 Asset
impairments 6.6 Other 11.5 ---- Non-cash stock compensation 3.4
Adjusted EBITDA $49.8 ===== Other (8.5) ---- Adjusted EBITDA $79.1
===== Performance Chemicals Segment LTM Combined Adjusted EBITDA
$79.1 --------------------- Ended ------------------------ May 31,
OMNOVA Solutions 2010 Consolidated -------- LTM as of May 31, 2010
Segment operating profit $69.3 Eliokem International Interest
expense - LTM as of May 31, 2010 49.8 ---- Amortization of deferred
Total Combined Adjusted financing - EBITDA $128.9 costs ======
Income tax - Depreciation & amortization 9.8 --- EBITDA $79.1
Restructuring & severance 0.2 Asset impairments - Non-cash
stock compensation 1.0 Other (9.8) ---- Adjusted EBITDA $70.5 =====
Forward-looking Statements - This press release includes
"forward-looking statements" as defined by federal securities laws.
These statements, as well as any verbal statements by the Company
in connection with this press release, are intended to qualify for
the protections afforded forward-looking statements under the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements reflect management's current expectation, judgment,
belief, assumption, estimate or forecast about future events,
circumstances or results and may address business conditions and
prospects, strategy, capital structure, sales, profits, earnings,
markets, products, technology, operations, customers, raw
materials, financial condition, and accounting policies, among
other matters. Words such as, but not limited to, "will," "may,"
"should," "projects," "forecasts," "seeks," "believes," "expects,"
"anticipates," "estimates," "intends," "plans," "targets,"
"optimistic," "likely," "would," "could," and similar expressions
or phrases identify forward-looking statements. All statements and
data in this press release and the accompanying oral remarks on a
"pro forma," "post-acquisition" or "combined" basis assume that the
Company's proposed acquisition of Eliokem is successfully completed
on the proposed terms. All forward-looking statements involve risks
and uncertainties. Many risks and uncertainties are inherent in
business generally and the markets in which the Company operates or
proposes to operate. Other risks and uncertainties are more
specific to the Company's businesses, including businesses the
Company acquires. The occurrence of such risks and uncertainties
and the impact of such occurrences is often not predictable or
within the Company's control. Any such occurrence could adversely
affect the Company's results and, in some cases, such effect could
be material. All written and verbal forward-looking statements
attributable to the Company or any person acting on the Company's
behalf are expressly qualified in their entirety by the risk
factors and cautionary statements contained herein. Any
forward-looking statement speaks only as of the date on which such
statement is made, and the Company undertakes no obligation, and
specifically declines any obligation other than that imposed by
law, to publicly update or revise any forward-looking statements
whether as a result of new information, future events or otherwise.
Risk factors and uncertainties that may cause actual results to
differ materially from expected results include, among others: the
ability of the Company to successfully complete the acquisition of
Eliokem and integrate Eliokem into its operations; the impact of
Eliokem's results of operations on the Company's ability to achieve
fully the strategic and financial objectives related to the
proposed acquisition of Eliokem, including the acquisition being
accretive to the Company's earnings; and unexpected costs or
liabilities that may arise from the acquisition of Eliokem.
Additional risk factors include: economic trends affecting the
economy in general and/or the Company's end-use markets; prices and
availability of raw materials including styrene, butadiene, vinyl
acetate monomer, polyvinyl chloride, acrylics and textiles; ability
to increase pricing to offset raw material cost increases; product
substitution and/or demand destruction due to product technology,
performance or cost disadvantages; loss of a significant customer;
customer and/or competitor consolidation; customer bankruptcy;
ability to successfully develop and commercialize new products; a
decrease in demand for domestically manufactured products due to
increased foreign competition and off-shoring of production;
ability to successfully implement productivity enhancement and cost
reduction initiatives; unexpected full or partial suspension of
plant operations; the Company's strategic alliance, joint venture
and acquisition activities; loss or damage due to acts of war or
terrorism, natural disasters, accidents, including fires, floods,
explosions and releases of hazardous substances; governmental
legislative and regulatory changes, including changes impacting
environmental compliance, pension plans, products and raw
materials; compliance with extensive environmental, health and
safety laws and regulations; rapid inflation in health care costs
and assumptions used in determining health care cost estimates;
risks associated with foreign operations including political unrest
and fluctuations in exchange rates of foreign currencies; prolonged
work stoppage resulting from labor disputes with unionized
workforce; meeting required pension plan funding obligations; stock
price volatility; infringement or loss of the Company's
intellectual property; litigation and claims against the Company
related to products, services, contracts, employment,
environmental, safety, intellectual property and other matters
arising out of the Company's business and adverse litigation
judgments or settlements; absence of or inadequacy of insurance
coverage for litigation, judgments, settlements or other losses;
availability of financing at anticipated rates and terms; and loan
covenant default arising from substantial debt and leverage and the
inability to service that debt, including increases in applicable
short-term or long-term borrowing rates. OMNOVA Solutions Inc. is a
technology-based company with last twelve months sales through May
2010 of US$785 million and a workforce of approximately 2,300
employees worldwide. OMNOVA, which has served the styrene butadiene
latex industry since the 1950s, is an innovator of emulsion
polymers, specialty chemicals, and decorative and functional
surfaces for a variety of commercial, industrial and residential
end-uses. Visit OMNOVA Solutions on the internet at www.omnova.com.
Sandi Noah, OMNOVA, Communications, +1-330-869-4292,
sandi.noah@omnova.com, or Michael Hicks, OMNOVA, Investor
Relations, +1-330-869-4411 Web Site: http://www.omnova.com
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