OMNOVA Solutions Announces Intention to Acquire Specialty Chemicals Manufacturer Eliokem International from AXA Private Equity
FAIRLAWN, Ohio, Sept. 22
o 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.
o Enhances Performance Chemicals segment's growth opportunities
o Broadens Performance Chemicals' markets, applications and technologies
o Expected to be accretive to earnings in 2012
o 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:
o 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.
o 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.
o Cost Savings: Synergies are expected to provide savings in
manufacturing, logistics, purchasing and SG&A by leveraging the
resources of an integrated global team.
o 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.
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.
SOURCE OMNOVA Solutions Inc.
CONTACT:
Sandi Noah,
OMNOVA,
Communications,
+1-330-869-4292,
sandi.noah@omnova.com,
or Michael Hicks,
OMNOVA,
Investor Relations,
+1-330-869-4411
Web Site: www.omnova.com
