TIDMSYNT
RNS Number : 5084J
Synthomer PLC
13 December 2022
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM ANY JURISDICTION
WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR
REGULATIONS OF SUCH JURISDICTION
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
For immediate release
13 December 2022
SYNTHOMER PLC
Proposed sale of the Laminates, Films and Coated Fabrics
Businesses
Synthomer plc ("Synthomer" or the "Company" and, together with
its subsidiaries, the "Group"), today announces it has agreed to
the sale of its laminates, films and coated fabrics businesses (the
"Laminates, Films and Coated Fabrics Businesses") to Surteco North
America, Inc. (the "Purchaser") (the "Proposed Transaction") for a
total enterprise value of approximately US$255 million (GBP208
million).
Transaction highlights
-- Agreement to sell the Laminates, Films and Coated Fabrics Businesses to the Purchaser for
a total enterprise value of US$255 million (GBP208 million). The net proceeds arising from
the Proposed Transaction are expected to be approximately US$245 million (GBP199 million)
(the "Net Proceeds")
-- The consideration implies an EV/EBITDA multiple of approximately 8 times based on the EBITDA
for the 12-month period ended 31 December 2021, which compares favourably with the post-synergy
acquisition multiple of approximately 7 times achieved in connection with the OMNOVA acquisition
in April 2020
-- The Net Proceeds will be used to repay certain indebtedness in order to strengthen the Group's
balance sheet and support a reduction in leverage towards the Company's target range of 1
to 2 times Net Debt to EBITDA over the medium term
-- The Proposed Transaction is in line with Synthomer's strategy as set out at the Capital Markets
Day in October to increase the specialty weighting of its portfolio through the sale of identified
non-core assets
Expected timetable
-- The Proposed Transaction constitutes a Class 1 transaction for the purposes of the Listing
Rules, and therefore requires the approval of Synthomer's shareholders. A circular containing
further details of the Proposed Transaction and a notice convening a general meeting of Synthomer
will be sent to Synthomer's shareholders in due course
-- The Proposed Transaction will also be conditional on certain regulatory approvals, customary
closing conditions and certain other conditions
-- Assuming satisfaction or waiver of all conditions to the Proposed Transaction, Completion
is expected to occur in Q1 2023
Michael Willome, CEO, Synthomer plc, said:
"This divestment is consistent with our recently announced
strategy to increase the specialty weighting of our portfolio and
focus on higher value, higher growth markets where we have strong
and sustainable leadership positions. The proceeds represent
excellent value for our shareholders and the transaction is a
significant step in the deleveraging of the Group. I would like to
thank those colleagues leaving Synthomer and wish them well for the
future."
Enquiries:
Synthomer plc
Tim Hughes +44 7764 859147
J.P. Morgan Cazenove (Sole Sponsor and Corporate Broker)
Richard Perelman, Charles
Oakes +44 20 7742 4000
Piper Sandler (Financial Adviser)
Ian George, Michael Tsangarides +44 20 7291 4670
Teneo (Financial Public Relations Adviser)
Charlie Armitstead +44 7703 330269
SYNTHOMER PLC
Proposed sale of the Laminates, Films and Coated Fabrics
Businesses
1. Introduction
The Company today announces it has agreed to sell its Laminates,
Films and Coated Fabrics Businesses to Surteco North America, Inc.
for a total enterprise value of approximately US$255 million
(GBP208 million), representing a multiple of approximately 8 times
EBITDA for the 12-month period ended 31 December 2021. The net
proceeds arising from the Proposed Transaction are expected to be
approximately US$245 million (GBP199 million) consisting of: US$250
million (GBP204 million) payable in cash on the Completion Date,
subject to customary adjustments and net of estimated transaction
costs of US$10 million (GBP8 million) and, US$5 million (GBP4
million) payable in cash on the thirteen (13) month anniversary of
the Completion Date.
On 12 October 2022, Synthomer announced an update to its
strategy, setting out its plans to 'Focus, Strengthen and Grow' the
business. As part of focusing the business, the Company intends to
increase the weighting of specialty chemicals versus base chemicals
in its portfolio, create a more balanced geographic exposure,
streamline its operational footprint and apply more rigorous
capital allocation across its business. During its strategic
review, Synthomer identified a number of non-core businesses which
have limited synergies with the rest of the Company's identified
growth platforms and which are less attractive areas for the
Company to deploy its capital. The Laminates, Films and Coated
Fabrics Businesses were identified as a non-core business as part
of this strategic review.
The board of Directors of Synthomer (the "Board") believes the
value to be achieved by the Proposed Transaction represents an
attractive outcome for Synthomer shareholders. The Net Proceeds
will be used to repay certain indebtedness in order to strengthen
Synthomer's balance sheet and support a reduction in leverage
towards the Company's target range of 1 to 2 times net debt to
EBITDA over the medium term.
Owing to its size, the Proposed Transaction constitutes a Class
1 transaction for the purposes of the Listing Rules, and therefore
requires the approval of Synthomer's shareholders. A circular
containing further details of the Proposed Transaction and a notice
convening a general meeting of Synthomer will be sent to
Synthomer's shareholders in due course.
2. Background to and reasons for the Proposed Transaction
On 12 October 2022, Synthomer outlined its strategy to
reposition its business towards specialty chemicals. As outlined in
that strategy, Synthomer plans to:
(A) focus through portfolio rationalisation to reduce complexity, increase end-market orientation,
expand its specialty solutions portfolio and maintain disciplined capital allocation;
(B) strengthen with investment in innovation leveraging sustainability, business excellence and
returning leverage to target levels; and
(C) grow from being a larger-scale to a more focused and stronger business in attractive end-markets.
As part of the new strategy, the Board outlined a new divisional
structure aligned to attractive end-markets. This reorganisation
will lead to the creation of three new divisions: (i) Coatings and
Construction Solutions; (ii) Adhesive Solutions; and (iii) Health,
Protection and Performance Materials.
The specialty growth platforms (the Coating and Construction
Solutions and Adhesive Solutions segments) benefit from robust
growth dynamics, have strong and sustainable leadership positions
and are significantly differentiated from their competitors. The
Health and Protection platform benefits from the attractive growth
dynamics of the underlying medical glove market but is inherently
more cyclical.
Performance Materials are the non-core elements of Synthomer's
portfolio and include legacy non-core businesses from the
Performance Elastomer and Industrial Specialty divisions, including
the Laminates, Films and Coated Fabrics Businesses.
The Laminates, Films and Coated Fabrics Businesses were acquired
as part of the acquisition of OMNOVA Solutions Inc. ("OMNOVA") in
2020.
The Board unanimously believes that the Proposed Transaction is
in the best interests of the Company, its Shareholders and its
other stakeholders as a whole, for the following reasons:
(A) the Proposed Transaction implies an EV/EBITDA multiple of approximately 8 times based on the
EBITDA for the 12-month period ended 31 December 2021 for the Laminates, Films and Coated
Fabrics Businesses , which compares favourably with the post-synergy acquisition multiple
for OMNOVA of approximately 7 times ;
(B) the Proposed Transaction is in line with the Company's strategy to increase the specialty
weighting of its portfolio through the sale of identified non-core assets; and
(C) the Net Proceeds will be used to repay certain indebtedness in order to strengthen the Group's
balance sheet and support a reduction in leverage towards the Company's target range of 1
to 2 times Net Debt to EBITDA.
3. Information on the Laminates, Films and Coated Fabrics Businesses
Synthomer's laminates business is a provider of functional and
decorative surfaces in North America for residential, commercial
and transportation end-markets. Products are used in kitchens and
bathrooms, recreational vehicles, store fixtures and luxury vinyl
tiles.
Synthomer's laminates business is one of the leading producers
offering both polyvinyl chloride ("PVC") and paper laminates. The
business has a large selection of customisable designs, deeply
entrenched customer relationships and proprietary product
technologies. The business has three manufacturing facilities in
North America, with additional production capabilities in
Thailand.
Synthomer's coated fabrics business is a provider of coated
fabrics for premium applications across South-East Asian OEM
automotive and motorcycle and North American commercial, marine and
transport seating end-markets. The business has a modern
manufacturing facility in Thailand and distribution centre in North
America.
In total, both businesses employ around 800 employees.
4. Use of Proceeds and Financial Effects of the Proposed Transaction
The Net Proceeds arising from the Proposed Transaction are
expected to be approximately US$245 million (GBP199 million).
The Net Proceeds will be used to repay certain indebtedness in
order to strengthen Synthomer's balance sheet and support a
reduction in leverage towards the Company's target range of 1 to 2
times Net Debt to EBITDA over the medium term.
In FY21, the Laminates, Films and Coated Fabrics Businesses
contributed EBITDA of US$33 million and underlying operating profit
of US$25 million to Synthomer. Following completion of the Proposed
Transaction, Synthomer will no longer receive the contribution that
the Laminates, Films and Coated Fabrics makes to the consolidated
operating profit of the Synthomer Group.
The Laminates, Films and Coated Fabrics Businesses' total assets
as at 31 December 2021 were US$124 million. Further information on
the financial effects of the Proposed Transaction will be set out
in the circular to shareholders.
5. Information on the Purchaser
The Purchaser is a subsidiary of Surteco Group SE, a
Germany-based developer, designer, producer and marketer of surface
materials based on paper and plastics. The shares of Surteco Group
SE are listed on the Prime Standard of the Frankfurt Stock Exchange
and are traded on the stock markets in Frankfurt, Stuttgart,
Munich, Berlin, Düsseldorf, Hamburg and Hannover.
Surteco Group SE operates through three segments: Decoratives,
Profiles and Technicals. Decoratives produce decor papers, finish
foils and edgebandings. Profiles manufactures floor strips and
skirtings, wall edging systems and technical extrusion (profiles).
Technicals manufacture impregnated products, plastic based finish
foils as well as edgebandings and finish foils with specific
requirements.
Surteco Group SE markets products under the Surteco, Döllken,
Dakor and Kröning brands, among others.
6. Group Trading Update
At the end of September, the Group reported that high inventory
levels of medical gloves and reduced demand had created a prolonged
period of destocking. This has continued to impact nitrile
butadiene rubber (NBR) production volumes, delaying a return to
pre-pandemic NBR growth. The Board's outlook for Performance
Elastomers is unchanged. It still expects this division to achieve
modest profitability for the second half of the year and that the
destocking impact is unlikely to abate before the end of 2023.
Synthomer also highlighted deteriorating macroeconomic
conditions, leading to reduced demand in construction and coatings
end markets. Whilst this has impacted trading in Synthomer's
European business through the second half of 2022 as anticipated,
this has also now extended to the Group's operations outside
Europe.
7. Laminates, Films and Coated Fabrics Trading Update
In line with the Synthomer Group, the Laminates, Films and
Coated Fabrics Businesses have seen deteriorating macroeconomic
conditions which have led to reduced demand during the second half
of 2022. The Laminates, Films and Coated Fabrics Businesses have
performed in line with these macroeconomic conditions and have not
seen any significant change relating to their market position, site
operations or regulatory position. In the individual segments of
the Laminates and Films business, we have seen destocking in the
Kitchen and Bath end market and some softer volumes in the
Recreational Vehicles end market which has impacted the trading
results. The Coated Fabrics business, however, has performed
robustly as the Thailand economy recovers from the impact of Covid
and margins benefit from falling resin prices and normalising
freight costs.
8. Principal Terms of the Proposed Transaction
On 13 December 2022, the Seller, the Company, the Purchaser and
the Purchaser Guarantor entered into the Sale and Purchase
Agreement, pursuant to which the Seller has agreed, on the terms
and subject to the conditions of the Sale and Purchase Agreement,
to sell the Laminates, Films and Coated Fabrics Businesses to the
Purchaser. The consideration payable by the Purchaser for the
Laminates, Films and Coated Fabrics Businesses is approximately
US$255 million (GBP208 million), with US$250 million (GBP204
million) payable in cash on the Completion Date, subject to
customary adjustments and, US$5 million (GBP4 million) payable in
cash on the thirteen (13) month anniversary of the Completion Date
.
As part of the Proposed Transaction, the Seller has given
certain warranties, indemnities and covenants to the Purchaser and
the Company has given certain covenants and undertakings to the
Purchaser in relation to the Resolution and the General
Meeting.
The Proposed Transaction is conditional upon the satisfaction
(or waiver, where applicable) of certain conditions prior to 13
December 2023, including:
(i) the receipt of any required consents or antitrust approvals
and the expiration or termination of any applicable waiting periods
(or extensions thereof) thereto;
(ii) the affirmative vote in favour of the resolution to approve
the Proposed Transaction by Synthomer shareholders representing a
simple majority of the votes represented in person or by proxy at
the general meeting;
(iii) consent to the Proposed Transaction of certain of the
Company's lenders pursuant to various financing agreements having
been obtained; and
(iv) registration of certain amendments to be made to a lease
which forms part of the Proposed Transaction.
Assuming satisfaction or waiver of all Conditions, Completion is
expected to occur during Q1 2023.
9. Irrevocable Undertaking
KLK, which holds 125,589,510 ordinary shares with a nominal
value of 10p each in the share capital of the Company (the
"Shares"), representing approximately 26.9% of the existing
ordinary share capital of Synthomer as at the Latest Practicable
Date, has irrevocably undertaken to vote in favour of the
resolution approving the Proposed Transaction at the general
meeting.
Appendix
Bases and Sources
1. The Proposed Transaction implies an EV/EBITDA multiple of
approximately 8 times based on the EBITDA for the 12-month period
ended 31 December 2022 for the Laminates, Films and Coated Fabrics
Businesses : Based on the Laminates, Films and Coated Fabrics
Businesses' EBITDA for the 12-month period ended 31 December 2021
of US$33 million with reference to the unaudited historical
financial information relating to the Laminates, Films and Coated
Fabrics Businesses for the 12 months ended 31 December 2021. EBITDA
for the Laminates, Films and Coated Fabrics Businesses and the
Synthomer Group is defined as operating profit before depreciation,
amortisation and Special Items (Special Items as set out in the
Synthomer Group's annual report for the year ended 31 December
2021).
2. The post-synergy acquisition multiple for OMNOVA of
approximately 7 times: Based on an announced Enterprise Value of
$824 million and OMNOVA's announced May 2019 LTM Adjusted EBITDA of
US$73.5m (OMNOVA Q4 press release) plus: (i) pre acquisition
results of Resiquimica relating to the period from 1 June 2018 to
25 September 2018, when Resiquimica was acquired by OMNOVA, of
US$0.9m; (ii) pre-tax cost savings of the Resiquimica acquisition
(as previously announced by OMNOVA) of US$1.1m (with US$0.9m
expected to be realised during OMNOVA's H2 2019 and an additional
pre-tax cost savings of US$0.2m expected to be realised during the
year ending 30 November 2020); (iii) pre-tax cost savings relating
to the Green Bay disposal (as previously announced by OMNOVA) of
US$7.7m (with US$3.85m expected to be realised during OMNOVA's H2
2019 and total pre-tax cost savings of US$7.7m expected to be
realised during the year ending 30 November 2020); and (iv) target
run-rate pre-tax cost synergies of US$29.6 million per annum.
3. Historical financial information relating to the Synthomer
Group: Unless otherwise indicated, the historical financial
information relating to the Synthomer Group included in this
announcement has been extracted without material adjustment from
the audited consolidated financial statements of the Synthomer
Group for the year ended 31 December 2021.
4. Historical financial information relating to the Laminates,
Films and Coated Fabrics Businesses: Unless otherwise indicated,
the historical financial information relating to the Laminates,
Films and Coated Fabrics Businesses for the year ended 31 December
2021 included in this document is unaudited and has been extracted
without material adjustment from the underlying consolidation
schedules and accounting records that underlie the Synthomer
Group's audited consolidated financial statements for the financial
year ended 31 December 2021.
5. Latest Practicable Date: 12 December 2022.
6. Exchange rate: unless otherwise stated, US$ / GBP exchange
rate of 0.8144 as at 5pm on the Latest Practicable Date as derived
from the data provided by Bloomberg.
IMPORTANT NOTICE
This announcement contains inside information and is issued on
behalf of the Group by Anant Prakash, Company Secretary.
This announcement is not intended to, and does not constitute,
or form part of, any offer to sell or issue or any solicitation of
an offer to purchase, subscribe for, or otherwise acquire, any
securities or a solicitation of any vote or approval in any
jurisdiction. Synthomer shareholders are advised to read carefully
the Circular once it has been published. Any response to the
Proposed Transaction should be made only on the basis of the
information in the Circular to follow.
Piper Sandler Ltd. ("Piper Sandler") is authorized and regulated
in the United Kingdom by the FCA. Piper Sandler is acting as
financial adviser exclusively for the Company and no one else in
connection with the Proposed Transaction and the matters set out in
this announcement and will not regard any other person (whether or
not a recipient of this announcement) as its client in relation to
the Proposed Transaction and will not be responsible to anyone
other than the Company for providing the protections afforded to
clients of Piper Sandler or its affiliates, or for providing advice
in relation to the Proposed Transaction or any other matters
referred to in this announcement.
J.P. Morgan Securities PLC, which conducts its UK investment
banking business as J.P. Morgan Cazenove ("J.P. Morgan"), is
authorized in the United Kingdom by the Prudential Regulation
Authority (the "PRA") and regulated in the United Kingdom by the
FCA and PRA. J.P. Morgan is acting as sponsor and financial adviser
exclusively for the Company and no one else in connection with the
Proposed Transaction and the matters set out in this announcement
and will not regard any other person (whether or not a recipient of
this announcement) as its client in relation to the Proposed
Transaction and will not be responsible to anyone other than the
Company for providing the protections afforded to clients of J.P.
Morgan or its affiliates, or for providing advice in relation to
the Proposed Transaction or any other matters referred to in this
announcement.
Apart from the responsibilities and liabilities, if any, which
may be imposed on Piper Sandler or J.P. Morgan by FSMA or the
regulatory regime established thereunder or under the regulatory
regime of any jurisdiction where the exclusion of liability under
the relevant regulatory regime would be illegal, void or
unenforceable, Piper Sandler, J.P. Morgan and any person affiliated
with them assumes no responsibility whatsoever for and makes no
representation or warranty express or implied, in relation to the
contents of this announcement, including its accuracy, completeness
or verification or for any other statement made or purported to be
made by it, or on its behalf and nothing contained in this
announcement is, or shall be, relied upon as a promise or
representation in this respect whether as to the past, present or
future, in connection with the Company, or the Proposed
Transaction. Piper Sandler, J.P. Morgan and their respective
subsidiaries, branches and affiliates accordingly disclaims to the
fullest extent permitted by law all and any duty, responsibility
and liability whether arising in tort, contract or otherwise (save
as referred to above) which it might otherwise be found to have in
respect of this announcement or any such statement or
otherwise.
Neither the contents of the Company's website nor any website
accessible by hyperlinks on the Company's website is incorporated
in, or forms part of, this announcement.
This announcement contains "forward-looking statements" which
includes all statements other than statements of historical fact,
including, without limitation, those regarding the Company's
financial position, business strategy, plans and objectives of
management for future operations, or any statements preceded by,
followed by or that include the words "targets", "believes",
"expects", "aims", "intends", "will", "may", "anticipates", "would,
"could" or similar expressions or negatives thereof. Such
forward-looking statements involve known and unknown risks,
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achievements of the Company to be materially different from future
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forward-looking statements. Such forward-looking statements are
based on numerous assumptions regarding the Company's present and
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will operate in the future. These forward-looking statements speak
only as at the date of this announcement. None of the Company,
Piper Sandler, J.P. Morgan or their respective Affiliates
undertakes or is under any duty to update this announcement or to
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