FAIRLAWN, Ohio, September 22, 2010 /PRNewswire/ --
- 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 (http://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) +1-320-365-3844. 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
OMNOVA Solutions May 31, May 31,
Consolidated 2010 Eliokem International 2010
----------------- ------ --------------------- -----
Income (loss) from
continuing
operations $44.1 Net Income $ 2.2
Interest expense 7.0 Interest expense 15.8
Amortization of deferred Amortization of
financing deferred financing
costs 0.6 costs 0.5
Income tax 2.6 Income tax 2.0
Depreciation & Depreciation &
amortization 22.6 amortization 13.5
----- -----
EBITDA $76.9 EBITDA $ 34.0
Restructuring & Restructuring &
severance 0.7 severance 4.3
Asset impairments 6.6 Other 11.5
Non-cash stock Adjusted EBITDA $ 49.8
=======
compensation 3.4
Other (8.5)
-----
Adjusted EBITDA $79.1
=====
Combined Adjusted
EBITDA
-------------------
LTM OMNOVA Solutions
Ended Consolidated
Performance Chemicals May 31, LTM as of May 31,
Segment 2010 2010 $ 79.1
----------------- ------
Segment operating profit $69.3 Eliokem International
LTM as of May 31,
Interest expense - 2010 49.8
-----
Amortization of deferred
financing Total Combined
costs - Adjusted EBITDA $128.9
=======
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
http://www.omnova.com.