Elementis PLC Elementis announces Personal Care acquisition
10 February 2017 - 6:00PM
UK Regulatory
TIDMELM
10 February 2017
Elementis significantly increases the scale of its personal care business with
US$360 million acquisition of SummitReheis
Acquisition adds a high quality business with significant potential for further
growth in the attractive personal care segment
Elementis plc ("Elementis" or the "Group") today announces that it has entered
into an agreement to acquire SRLH Holdings, Inc. ("SummitReheis") from an
affiliate of One Rock Capital Partners, LLC ("One Rock") for an enterprise
value of US$360 million, (the "Acquisition"). SummitReheis will become part of
an enlarged personal care business within Elementis. For the year ended 31
December 2016, SummitReheis is expected to report revenue of US$134 million and
underlying EBITDA of approximately US$28 million. The acquisition enterprise
value is equivalent to approximately 11.8x SummitReheis expected underlying
EBITDA for 2016 (including run rate cost synergies).
SummitReheis is a high quality, high margin specialty chemicals platform that
produces a range of critical active ingredients and materials tailored for use
in personal care, pharmaceutical and dental products. SummitReheis'
anti-perspirant actives business (more than 60 per cent. of its sales) is the
global leader in the manufacture and sale of active ingredients for
anti-perspirants and has long standing relationships with key consumer product
companies across the Americas, Europe and Asia.
Transaction highlights:
* Acquisition creates an enlarged personal care business with annual sales of
approximately US$200 million, significantly increasing the Group's presence
in this important end market
* Enhanced growth potential driven by the combination of complementary
products, customers and a broader geographic presence which together offer
cross-selling opportunities
* Critical components for the US$13 billion anti-perspirant market with
growth driven by increasing penetration in emerging markets and demand for
premium and higher efficacy products in established geographies
* Acquisition will be funded from cash resources and new debt facilities of
US$475 million which will be supported by the cash generation
characteristics of the enlarged Group
* Expected to deliver material earnings accretion and substantial free cash
flow accretion in the current financial year
* Return on invested capital ("ROIC") expected to be in line with Elementis'
cost of capital in the first full year of ownership
Notification of Results and Special Dividend:
* Elementis will report its Full Year Results for the year ended 31 December
2016 on 1 March 2017
* The Board of Elementis can confirm that it expects earnings per share for
the year to 31 December 2016 to be in line with current market expectations
* The Board confirms that its consideration of special dividends in respect
of 2016 will not be impacted by the Acquisition
Paul Waterman, CEO of Elementis plc, said:
"At our recent Capital Markets Day presentation, we highlighted the growth
prospects in personal care as a key opportunity for Elementis, driven by long
term positive demographic trends and an increasingly sophisticated consumer.
Our leading position with proprietary hectorite and Rheoluxe® rheology
modifiers will be augmented by SummitReheis' complementary position in
specialty additives for anti-perspirants, pharmaceuticals and dental products.
"The Group is well positioned to capitalise on this acquisition through the
enhanced geographic footprint and strong customer relationships that it brings.
Together with our existing business, the acquisition of SummitReheis is
transformative for our personal care business, creating a substantial, high
return platform that will help accelerate our Reignite Growth strategy."
Strategic rationale
* Personal care market is a significant growth opportunity for Elementis
* Anti-perspirants is a highly attractive, growing segment of the personal
care market
* Acquisition creates a US$200 million personal care business of Elementis
with critical mass and significant growth prospects
+ Combines SummitReheis' key active ingredients for anti-perspirants with
Elementis' enabling technology of hectorites and synthetic polymers
* Accelerates growth for both SummitReheis and Elementis as a result of the
expanded footprint with key customers and broader geographical reach
* Combined business has strong relationships with key consumer products
companies
* SummitReheis products differentiated by their superior quality and
certifications (for example, FDA requirements in the US and ECHA
requirements in Europe)
* Benefits expected from the realisation of additional growth opportunities
Financial highlights
* Enterprise value of US$360 million on a cash free, debt free basis
* Immediate adjusted earnings per share accretion expected in the current
financial year and double digit adjusted earnings per share accretion in
2018
* Expected to enhance Elementis' group margin in the current financial year
* Run rate cost synergies of up to US$3 million per annum identified
* ROIC expected to be in line with Elementis' cost of capital in the first
full year of ownership
* Funded through Elementis' existing cash resources and US$475 million of new
debt facilities
* Elementis to remain prudently financed post acquisition
SummitReheis and Elementis
SummitReheis operates in a highly attractive, growing segment of the personal
care market. Anti-perspirant products are experiencing growing demand in
developed markets, particularly the US, driven by demand for premium and higher
efficacy products. In emerging markets, particularly Latin America, India and
South East Asia, anti-perspirant products are benefitting from increasing
market penetration driven by changing lifestyle trends and increased
discretionary income. SummitReheis' primary manufacturing operations are in
North America and Europe with approximately 70% of revenue from these markets.
The combination of SummitReheis with Elementis' global distribution networks
creates the opportunity to drive growth in emerging markets.
As the leading global producer of active ingredients for anti-perspirants,
SummitReheis has built long-term relationships with key consumer product
companies. Elementis' existing personal care business is part of its Specialty
Products division and supplies hectorite and Rheoluxe® rheology modifiers that
enhance the effectiveness of SummitReheis' products. SummitReheis will be
merged with Elementis' existing personal care activities, creating a business
with approximately US$200 million of annual sales, representing approximately
25 per cent. of Elementis' pro forma combined sales and in excess of 30 per
cent. of Elementis' pro forma combined operating profit before amortisation.
Information regarding SummitReheis
SummitReheis' primary focus is the manufacture and sale of aluminium and
zirconium based active ingredients for anti-perspirant products to global
consumer products companies. It is the global leader in the fast growing
anti-perspirant actives ("AP actives") market with locations in the US, Europe
and Asia. Its technologies provide the base ingredients providing
sweat-blocking characteristics in all types of anti-perspirant products such as
aerosols, sticks and roll-ons. Over 60 per cent. of SummitReheis' sales are
from its AP actives business.
SummitReheis' Pharma Actives business is a leading European producer of the
active ingredients for indigestion and heartburn remedies. These products have
similar chemistry and manufacturing processes to the core business and
long-term customer relationships in the pharmaceutical industry. SummitReheis'
Specialty Dental business manufactures dental plasters, alloys, discs and
moulding materials that are used to make dental crowns, bridges, replacement
teeth and in other applications and has a leading position in Germany.
SummitReheis is headquartered in Huguenot, New York. In June 2015, SummitReheis
acquired the European AP actives, pharma and dental businesses of B.K. Giulini.
SummitReheis' financial profile
For the year ended 31 December 2015, SummitReheis reported revenue of US$103
million, EBITDA of US$15 million and operating income of US$8 million. Pro
forma for a full year contribution from the acquired B.K. Giulini businesses,
SummitReheis would have reported underlying EBITDA of approximately US$25
million in the year ended 31 December 2015. As at 31 December 2015,
SummitReheis had total assets of US$208 million and net assets of US$12
million.
For the year ended 31 December 2016, SummitReheis is expected to report revenue
of US$134 million and underlying EBITDA of approximately US$28 million.
Transaction details and timing
Completion of the acquisition is expected to take place in the second quarter
of 2017 following receipt of anti-trust clearances in the US and Germany.
Elementis intends to fund the acquisition through existing cash resources and
US$475 million of new debt facilities which will also be used to refinance
Elementis' existing debt facilities. The new debt will be provided through a
new fully underwritten US$275 million revolving credit facility and US$200
million term loan facility. The new debt facilities have a 5 year term and are
on terms in line with the Group's existing facilities. Elementis will remain
prudently financed post acquisition.
Conference call
Paul Waterman, Chief Executive Officer, and Ralph Hewins, Chief Financial
Officer, will hold an analyst and investor call today at 08:30a.m. UK time to
discuss this announcement. To participate in the conference call, please dial:
UK +44 (0)20 3139 4830; UK toll free 0808 237 0030 or click here for
international numbers: http://events.arkadin.com/ev/docs/
NE_FEL_Events_International_Access_List.pdf.
The participant PIN code is 33260441#.
A copy of the presentation slides will be available at:
https://arkadin-event.webex.com/arkadin-event/onstage/g.php?MTID=
e4da989b68546419fb2a9e73a4634bb83
The event password is: 682839.
Press releases can also be found on the website www.elementisplc.com
For further information on this release please contact:
Financial Advisers
Gleacher Shacklock LLP
Edward Cumming Bruce / Mark Hammond / Tom Quinn
T: +44 (0)20 7484 1120
Natrium Capital
Alasdair Nisbet
T: +44 (0)20 3574 4635
Media Contacts
FTI Consulting
Deborah Scott / Matthew Cole
T: +44 (0)20 3727 1000
Editor's notes
SummitReheis is a leading global specialty chemicals platform that produces a
range of critical active ingredients and materials tailored for use in personal
care, pharmaceutical and dental products. The company was founded in 1940 and
is headquartered in Huguenot, New York, US.
* SummitReheis' AP actives business is the global leader in the production of
active ingredients in anti-perspirant products and accounted for 62% of
SummitReheis' pro forma revenue for the year ended 31 December 2015
* SummitReheis' Pharma actives business produces sucralfate, antacid pastes
and powders which are critical components of regulated pharmaceutical
products sold both over-the-counter and with prescription. The Pharma
actives business provides ingredients used in antacids and gastrointestinal
remedies utilising similar chemistry and manufacturing plant as the AP
actives business in Germany. It generated 18% of SummitReheis' pro forma
revenue for the year ended 31 December 2015
* SummitReheis' Specialty Dental business manufactures dental plasters alloys
/discs and moulding materials that are used to make dental crowns, bridges
and replacement teeth and in other applications. It generated 20% of
SummitReheis' pro forma revenue for the year ended 31 December 2015
Anti-perspirants reduce sweat by a significant amount and deodorants use
biocides and scent to mask the effects of sweating. SummitReheis' AP active
ingredients are based on either ACH (Aluminium Chlorohydrate) or ZAG (Zirconium
Aluminium Glycine). They are used in all of the key types of anti-perspirant
products: sticks, roll-ons and aerosols. In the US the preferred
anti-perspirants are sticks whilst in Europe they are aerosols. ACH and ZAG are
used in most products however ZAG is not used in aerosols.
Elementis' hectorite clays or gels are used in anti-perspirants in conjunction
with SummitReheis' products. Specifically, the hectorite clays enable the
effective use of ACH in aerosols, the highest growth application. Hectorite
acts as a rheology modifier, providing uniformity in application and aiding in
the suspension of aluminium salts within aerosol anti-perspirants. As well as
acting as an in-process suspension aid, the use of hectorite also reduces the
undesirable appearance of armpit staining on shirts.
SummitReheis has strong and long-standing relationships with the top global
manufacturers of anti-perspirants and deodorants. The AP actives business
serves a broad customer base from small, regional suppliers to some of the
leading global personal care manufacturers. The Pharma actives business
supplies both multinational pharmaceutical companies and regional
pharmaceutical suppliers selling OTC and prescription antacids. For Specialty
Dental the business supplies a range of direct customers, distributors and
agents across varied markets, including dental laboratory equipment, medical
bandages and 3D printing.
SummitReheis supplies its customers globally. Its revenue is well diversified,
with 41% in Europe, 33% in North America and 26% in the rest of the world (for
the year ended 31 December 2015). Its manufacturing operations are in the US,
Germany, UK and China. It also has plans to build a manufacturing capability in
Brazil and Thailand. SummitReheis' geographical spread of operations is
complementary to that of Elementis. SummitReheis employs approximately 270
people.
END
(END) Dow Jones Newswires
February 10, 2017 02:00 ET (07:00 GMT)
Elementis (LSE:ELM)
Historical Stock Chart
From Mar 2024 to Apr 2024
Elementis (LSE:ELM)
Historical Stock Chart
From Apr 2023 to Apr 2024