FAIRLAWN, Ohio, Dec. 9, 2010 /PRNewswire/ --
- The acquisition creates larger, more diverse global specialty
chemical and functional surfaces company with sales over
US$1 billion and Adjusted EBITDA of
approximately US$129 million, based
on last twelve months through August
2010.
- Significantly expands Performance Chemicals segment's global
capabilities with particular emphasis on the high growth,
developing markets in Asia.
- Diversifies Performance Chemicals segment's opportunities for
growth by adding new, but related products, markets and
technologies, and broadening its applications capability.
- Expected to be accretive to earnings in 2012.
OMNOVA Solutions (NYSE: OMN) today announced that it has
completed its acquisition of specialty chemicals manufacturer
Eliokem International ("ELIOKEM") from AXA Private Equity.
OMNOVA paid 227.5 million euros
for ELIOKEM, or approximately US$302
million at current exchange rates, before subtracting
ELIOKEM's net debt and subject to working capital and capital
expenditure adjustments. The Company expects the transaction
to be neutral to slightly dilutive to earnings in 2011, but
accretive in 2012.
In connection with the acquisition, the Company issued
US$250 million in senior notes due
2018, replaced its existing US$150
million term loan with a new US$200
million term loan, and amended and extended its existing
revolving credit facility.
"This combination creates a significantly enhanced, more
diversified Performance Chemicals business that is well positioned
to serve customers on a global basis," said Kevin McMullen, Chairman and Chief Executive
Officer of OMNOVA Solutions. "It contributes to all three of
our Company's strategic objectives by providing entry into several
new higher growth markets, expanding our portfolio of value-added
technology solutions and significantly broadening our global
manufacturing footprint. Additionally, synergies are expected
to provide savings in manufacturing, logistics, purchasing and
SG&A by leveraging the resources of an integrated global
team.
"Together, with our Decorative Products functional surfaces
business, OMNOVA Solutions will be a US$1.1
billion company, based on last twelve months sales through
August," McMullen said. "Over 40% of those sales will be
outside the United States."
While 75% of ELIOKEM's sales are in product markets that OMNOVA
has not previously served, ELIOKEM's business model – including
manufacturing process, key raw materials and go-to-market approach
– is very similar to OMNOVA's. Focusing on the same basic
emulsion polymerization process, the acquisition adds a number of
new acrylic, styrene butadiene and nitrile chemistries and
applications, including coating resins, elastomeric modifiers,
antioxidants, specialty rubbers and reinforcing resins, as well as
complementary products for oil field and specialty latex
applications.
OMNOVA Solutions' Performance Chemicals business has been
primarily a producer of styrene butadiene, acrylic and other
latices and specialty chemicals used in coatings for high-end paper
and packaging, carpet, durable and consumable nonwovens, tape and
release coatings, floor polishes, construction, oil field, textile
finishes, digital printing, graphic arts and other specialty
applications.
Both chemical businesses have achieved solid growth in 2010,
with combined last twelve months sales and Adjusted EBITDA through
August of approximately US$788
million and US$122 million,
respectively.
In addition to OMNOVA's five chemical production facilities in
North America which provide
products and services worldwide, the acquisition adds global
manufacturing capability to serve Europe and the high growth, developing markets
in Asia with one plant in
France (Le
Havre), two plants in China
(Ningbo and Caojing) and one in
India (Valia). In addition,
the ELIOKEM plant in Akron, Ohio,
will provide OMNOVA with important new processing capabilities.
Both OMNOVA and ELIOKEM have strong polymer development
capabilities and a talented team of scientists and technical
service specialists which, in combination, will accelerate
development of a broader range of solutions for new and existing
customers. The combined Company will have R&D
capabilities on three continents.
"Our Performance Chemicals business will remain headquartered in
Fairlawn, Ohio, with global
manufacturing and product line management structured regionally
around (1) North America, (2)
Europe, India and the Middle East, and (3) Asia," said Jim
Hohman, President of OMNOVA's Performance Chemicals segment.
"This structure will assure an aligned business strategy
focused on providing value-added solutions to our customers on a
global basis and achieving profitable sales growth."
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, 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
August 31, 2010)
(Dollars in
millions)
|
|
|
LTM
|
|
LTM
|
|
|
Ended
|
|
Ended
|
|
|
August
31,
|
|
September
30,
|
|
OMNOVA Solutions
Consolidated
|
2010
|
Eliokem
International
|
2010
|
|
Income (loss) from continuing
operations
|
$37.5
|
Net income
|
$4.3
|
|
Interest expense
|
6.9
|
Interest expense
|
16.5
|
|
Amortization of deferred
financing costs
|
0.6
|
Amortization of
deferred
|
|
|
Income tax
|
2.8
|
financing costs
|
-
|
|
Depreciation &
amortization
|
21.4
|
Income tax
|
4.6
|
|
EBITDA
|
$69.2
|
Depreciation &
amortization
|
13.2
|
|
Restructuring &
severance
|
0.6
|
EBITDA
|
$38.6
|
|
Asset impairments
|
6.6
|
Restructuring &
severance
|
1.5
|
|
Non-cash stock
compensation
|
3.5
|
Other
|
10.9
|
|
Other
|
(2.2)
|
Adjusted EBITDA
|
$51.0
|
|
Adjusted EBITDA
|
$77.7
|
|
|
|
|
|
|
|
|
|
LTM
|
|
|
|
|
Ended
|
|
|
|
|
August
31,
|
|
|
|
Performance
Chemicals
|
2010
|
Combined Adjusted
EBITDA
|
|
|
Segment operating
profit
|
$69.6
|
OMNOVA Solutions
Consolidated
|
|
|
Interest expense
|
-
|
LTM as of August 31,
2010
|
$77.7
|
|
Amortization of deferred
financing costs
|
-
|
Eliokem International
|
|
|
Income tax
|
-
|
LTM as of September 30,
2010
|
51.0
|
|
Depreciation &
amortization
|
9.6
|
Total Combined Adjusted
EBITDA
|
$128.7
|
|
Segment EBITDA
|
$79.2
|
|
|
|
Restructuring &
severance
|
-
|
|
|
|
Asset impairments
|
-
|
|
|
|
Non-cash stock
compensation
|
1.2
|
|
|
|
Other
|
(9.3)
|
|
|
|
Segment Adjustment
EBITDA
|
$71.1
|
|
|
|
|
|
|
|
|
|
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 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 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 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 –
excluding the ELIOKEM acquisition – last twelve months sales
through August 2010 of US$827 million and a workforce of approximately
2,300 employees worldwide. The acquisition will add
approximately 600 ELIOKEM employees. 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.
SOURCE OMNOVA Solutions Inc.