Cytec Industries Inc announced its firm intention to acquire all of the outstanding shares of Umeco plc, an international provider of advanced composite materials, in an all-cash transaction valued at approximately $439 million (£274.3 million based on a 1.60 exchange rate).
The board of directors of Umeco intends to unanimously recommend the transaction to Umeco shareholders. The acquisition of Umeco will allow Cytec to further enhance and leverage its position as a technology leader in advanced composite materials. The transaction will expand Cytec's presence in both aerospace and industrial applications, an area where Cytec sees excellent opportunities for growth and value creation. Both companies' boards of directors have unanimously approved the transaction, full details of which are contained in an announcement made today in the United Kingdom under Rule 2.7 of the U.K. #
"We are excited about combining Umeco with Cytec's existing advanced composites businesses. It greatly improves our composite presence in the industrial sector, where we see tremendous potential for significant value creation in applications like automotive as customers seek to reduce weight and CO2 emissions. In addition, the acquisition also enhances our near-term composite capacity while we complete capital investments over the next few years," said Shane Fleming, Chairman, President and Chief Executive Officer.
"This transaction is consistent with our strategy to focus on profitable and growing segments where we can leverage our technological leadership. The acquisition of Umeco will provide us with additional scale, a dedicated supply chain well-tailored to the needs of the high performance industrial sector and application development capabilities that will help us respond quickly and effectively to customers' needs."
Neil Johnson, Non-executive Chairman of Umeco, commented, "Umeco is an excellent fit with Cytec, which can draw on Umeco's technological capabilities, infrastructure and existing customer base as it continues to build on its industry-leading expertise in advanced composite materials. Further, the acquisition will expand and enhance Cytec's product and service offering with the addition of the Process Materials business."
Founded in 1917, Umeco plc is an international provider of advanced composite materials, primarily to the aerospace and defense industries, and industrial sectors such as automotive. Serving high growth, global end markets, Umeco's Structural Materials business focuses on the development, manufacture and supply of advanced composite materials, and its Process Materials business focuses on the development, manufacture and supply of processing materials for the composites industry. Umeco is headquartered in the U.K. and reported revenues of £207 million ($332 million assuming a 1.60 exchange ratio) in its most recent financial year ended 31 March 2011.
The transaction is expected to be immediately accretive to Cytec's earnings per share. It will extend Cytec's portfolio of products, add new revenue streams, and enhance production capacity that will enable the combined company to leverage its strong customer relationships and partner network to expand distribution worldwide. Year one targeted synergies are in raw material costs, administrative areas and increasing aerospace revenue from added capacity which are approximately $15 million with additional synergies anticipated over time as we move through the integration process. The estimated EPS accretion for the remainder of 2012 is approximately $0.20 per share and full year 2013 is estimated at approximately $0.65 per share including synergies.
Mr. Fleming continued, "This transaction is an important step forward as we position Cytec with an industry-leading portfolio of growth businesses within our Engineered Materials and In Process Separation growth platforms. We will continue to build on our recent success in capturing new business and penetrating the market with our advanced technology solutions as we seek to deliver enhanced value to our stakeholders."
Cytec expects to finance the acquisition using cash balances on hand, including $210 million recently drawn down under its $400 million credit revolver facility, with the objective of maintaining an investment grade profile.
Upon completion of the transaction, Cytec will organize the combined assets in two separate reporting segments. Umeco's advanced materials business will be integrated into a newly created High Performance Industrial Materials ("HPIM") segmenment that will focus on non-aeerospace growth markets. Cytec's Engineered Materials ("CEM") segment will continue to focus on aerospace growth opportunities. Cytec does not anticipate significant workforce reductions resulting from this transaction, which is intended to accelerate growth in Industrial markets and thereby create additional opportunities for profitable growth.
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