FAIRLAWN, Ohio, December 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 September
OMNOVA Solutions 31, 30,
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 Amortization of
financing costs 0.6 deferred
Income tax 2.8 financing costs -
Depreciation & amortization 21.4 Income tax 4.6
----
Depreciation &
EBITDA $69.2 amortization 13.2
----
Restructuring & severance 0.6 EBITDA $38.6
Restructuring &
Asset impairments 6.6 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, Combined Adjusted
Performance Chemicals 2010 EBITDA
--------------------- ---- ------------------
OMNOVA Solutions
Segment operating profit $69.6 Consolidated
LTM as of August 31,
Interest expense - 2010 $77.7
Amortization of deferred
financing costs - Eliokem International
LTM as of September 30,
Income tax - 2010 51.0
----
Total Combined Adjusted
Depreciation & amortization 9.6 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
http://www.omnova.com.