Neville Prior 10 February 2017 11:23:38 AM
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.
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
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 RheoluxeR 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.”
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
o 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
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 RheoluxeR 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.