FAIRLAWN, Ohio, Dec. 9, 2010 /CNW/ -- FAIRLAWN, Ohio, Dec. 9, 2010
/CNW/ -- -- 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 31, 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 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 www.omnova.com. Sandi Noah, Communications, U.S.,
+1-330-869-4292, sandi.noah@omnova.com; Liliane Perez,
Communications, Europe, +33 1 69 29 27 87,
liliane_perez@eliokem.com; Michael Hicks, Investor Relations,
+1-330-869-4411 Web Site: http://www.omnova.com
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