AI Magazine Issue 2 2017

4 Acquisition International - February 2017 News: from around the world Elementis - $360Million Acquisition of SummitReheis 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 $134 million and underlying EBITDA of approximately $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%. 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 and; • 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 $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; Elementis plc recently announced 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). • 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) and; • 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 and; • Elementis to remain prudently financed post acquisition. www.elementisplc.com