Chemtura Corporation (NYSE:CHMT) (Euronext:CHMT) (“Chemtura” or the
“Company”) today announced that it has entered into a stock purchase
agreement to sell its Consumer Products business, including dedicated
manufacturing plants in the U.S. and South Africa, to KIK Custom
Products Inc. (“KIK”) for $315 million in cash at closing subject to
certain customary pre- and post-closing adjustments, including for
working capital and assumed pension liabilities. The Company also
announced today that its board of directors has decided to explore a
sale of the Company’s agrochemicals business, Chemtura AgroSolutions.
The agreement to sell the Consumer Products business, combined with the
decision to explore a sale of Chemtura AgroSolutions, is aimed at
delivering substantial near-term value to shareholders while further
focusing the Company on opportunities to create additional value as a
pure-play leader in the global development, marketing, manufacture and
sale of industrial specialty chemicals.
The Company expects to use a substantial portion of the proceeds from
the sale of Consumer Products and potential sale of the agrochemicals
business to return capital to shareholders. The Company will also use
proceeds to continue to make important investments to strengthen and
enable the continuing growth of the remaining businesses, as well as pay
down debt in order to return towards its long-term stated total leverage
target of approximately 2X Adjusted EBITDA.
"Today’s announcements represent the next step in our plan to simplify
and transform our portfolio, positioning us to better benefit from
secular industry growth trends in our chosen areas of market focus and
create a sustainable competitive advantage,” said Craig A. Rogerson,
Chairman, President and CEO of Chemtura. “Following the sales of our
Consumer Products and Antioxidants businesses, a sale of Chemtura
AgroSolutions would transform Chemtura into a more focused, pure-play
industrial specialty chemicals company with leading global positions
that we believe can capitalize on attractive end-market growth trends,
and continue delivering superior value to our shareholders and
opportunities for our employees for many years to come.”
POTENTIAL SALE OF CHEMTURA AGROSOLUTIONS
Mr. Rogerson continued, “A sale of Chemtura AgroSolutions at the right
price would be a compelling opportunity to unlock significant value for
our shareholders and a logical strategic step for Chemtura at this time.
We recognize the strength of our agrochemicals business and its
long-term prospects. However, we believe our current share price does
not fully reflect its embedded value. We have received credible
unsolicited expressions of interest and the board has determined,
consistent with its fiduciary duties, that this is the right time to
invite and evaluate offers for the business. Importantly, while we think
this may be a compelling financial opportunity, we will complete a sale
only if we can realize an attractive value for the business.”
Chemtura AgroSolutions is a leading provider of fungicides, herbicides,
insecticides, miticides, plant growth regulators and seed enhancement
products for select crops in attractive geographies, with a strong new
product portfolio and development program and field service expertise.
It is a healthy and profitable business segment which generated revenues
of $435 million and Adjusted EBITDA of $89 million in the last twelve
months ending June 30, 2013 (refer to reconciliation table). Chemtura
AgroSolutions has a global presence serving customers in more than 120
countries.
The Company has retained Morgan Stanley & Co. LLC to act as its
financial advisor in connection with the Chemtura AgroSolutions
divestiture process. Debevoise & Plimpton LLP is acting as its legal
counsel.
The Company notes that a definitive timetable for the sale process has
not been finalized and there can be no assurance that the process will
result in a sale of the Chemtura AgroSolutions business.
MORE FOCUSED PLATFORM GOING FORWARD
Following a sale of Consumer Products and potential sale of the
Company’s agrochemicals business, Chemtura’s core platform will be
focused and organized around two attractive segments: Industrial
Performance Products (“IPP”) (petroleum additives and urethanes
products) and Industrial Engineered Products (“IEP”) (flame retardants
and brominated products, and organometallics). These segments have
leading global industry positions in a number of markets.
Mr. Rogerson added, “Chemtura is well-positioned to extend IPP and IEP
in the faster growing regions and in high opportunity applications
across markets that offer strong secular growth. For example, in the
fourth quarter, we will formally open our new multipurpose plant in
Nantong, China, and we are committed to continuing to invest in these
kinds of platforms for higher margin products going forward.”
SALE OF CONSUMER PRODUCTS
With regard to the sale of the Consumer Products business, Mr. Rogerson
said, “We have already addressed a portion of the stranded costs
associated with this segment and have plans in place to rapidly
eliminate the remainder after the transaction closes. KIK is a respected
manufacturer and employer, and we believe that the Consumer Products
business will be in good hands.”
With over $1.2 billion in sales in 2012, and more than 3,000 employees,
Toronto, Canada-based KIK is one of North America’s largest contract and
private label manufacturers of consumer, institutional and industrial
products. The KIK network includes 14 integrated manufacturing
facilities strategically located throughout North America. KIK’s product
lines include bleach, household cleaners and sanitizers, pool and spa
water treatment products and additives, personal care and
over-the-counter medicated and pharmaceutical products, all supported by
in-house technical expertise and value-added services. KIK produces
national brand and private label consumer products for Fortune 500
companies. For more information about KIK, visit www.kikcorp.com.
The Consumer Products business is known as BioLab in North America and
Bayrol in Europe. The purchase price is subject to pre- and post-closing
adjustments for working capital and assumed pension liabilities. The
transaction is subject to customary closing conditions and regulatory
approvals with a targeted close date of December 31, 2013.
Chemtura expects to begin accounting for its Consumer Products segment
as a “discontinued operation” in its third quarter 2013 financial
statements. Before the end of November, Chemtura anticipates making
available historical GAAP and Managed Basis statements of income
reflecting the discontinued operations treatment to assist investors in
making prior period comparisons.
THIRD QUARTER 2013 UPDATE
Mr. Rogerson continued, “While we are excited about the future
opportunities for our industrial segments, especially with the new
Nantong multipurpose plant officially opening in the fourth quarter, the
near-term weakness we have seen in the first half of 2013 for the IEP
segment continued in the third quarter. Electronics and insulation foam
applications remained weak and we have concluded to record an increase
in inventory reserves for some slower moving electronics products. As a
result, third quarter operating income for IEP will be close to
break-even. This quarter, IPP absorbed the initial start-up costs of its
new plants in the Netherlands and China, but still expects to deliver
about the same level of operating income as it did in the third quarter
of 2012. Chemtura AgroSolutions has continued its strong track record of
improvement and looks set to show year-on-year growth in operating
income of approximately 15%. These performance trends combined with the
impact of adopting discontinued operations treatment for the Consumer
Products segment will result in our third quarter earnings being
substantially lower than current consensus.”
Copies of this release, as well as informational slides, will be
available on the Investor Relations section of our website at www.chemtura.com.
We will host a teleconference to review this announcement at 5:30 p.m.
(EDT) on October 10, 2013. Interested parties are asked to dial in
approximately 10 minutes prior to the start time. The call-in number for
U.S. based participants is (866) 688-8351 and for all other participants
is (706) 679-4287. The conference ID code is 77804314. An audio webcast
of the call can be accessed via the link below during the time of the
call: https://event.webcasts.com/starthere.jsp?ei=1023978.
Replay of the call will be available for thirty days, starting at 7:30
p.m. (EDT) on October 10, 2013. To access the replay, call toll-free
(855) 859-2056 or (404) 537-3406, and enter access code 77804314.
About Chemtura
Chemtura Corporation, with 2012 net sales of $2.6 billion,1
is a global manufacturer and marketer of specialty chemicals,
agrochemicals and pool, spa and home care products. Additional
information concerning us is available at www.chemtura.com.
1 2012 net sales of $2.6 billion reflect discontinued
operations treatment for the sale of Chemtura’s Antioxidants business.
Managed Basis Financial Measures
Information presented in this press release and in the attached
financial table includes financial measures that are not calculated or
presented in accordance with Generally Accepted Accounting Principles in
the United States (“GAAP”). In this press release, we use Adjusted
EBITDA as a managed basis financial measure. Reconciliations of Adjusted
EBITDA to the most directly comparable GAAP financial measures are
provided in the attached financial tables. We believe that such managed
basis financial measures provide useful information to investors and may
assist them in evaluating our underlying performance and identifying
operating trends. In addition, management uses these managed basis
financial measures internally to allocate resources and evaluate the
performance of our operations. While we believe that such measures are
useful in evaluating our performance, investors should not consider them
to be a substitute for financial measures prepared in accordance with
GAAP. In addition, these managed basis financial measures may differ
from similarly titled managed basis financial measures used by other
companies and do not provide a comparable view of our performance
relative to other companies in similar industries.
Forward-Looking Statements
This document includes forward-looking statements within the meaning of
Section 27(a) of the Securities Act of 1933, as amended and Section
21(e) of the Exchange Act of 1934, as amended. These forward-looking
statements are identified by terms and phrases such as “anticipate,”
“believe,” “intend,” “estimate,” “expect,” “continue,” “should,”
“could,” “may,” “plan,” “project,” “predict,” “will” and similar
expressions and include references to assumptions and relate to our
future prospects, developments and business strategies.
Factors that could cause our actual results to differ materially from
those expressed or implied in such forward-looking statements include,
but are not limited to:
-
Our ability to implement our growth strategies in rapidly growing
markets and faster growing regions;
-
Our ability to execute timely upon our portfolio management strategies
and mid and long range business plans;
-
The receipt of governmental and other approvals associated with the
sale of the Consumer Products business and the successful fulfillment
or waiver of all other closing conditions for such a transaction
without unexpected delays or conditions;
-
The successful closing of the sale of the Consumer Products business
and separation of that business from the rest of our businesses;
-
Our ability to identify one or more potential purchasers of the
Chemtura AgroSolutions business who are willing to pay a price for the
business that we are willing to accept, and to reach a definitive
agreement on a mutually acceptable transaction with such purchaser;
-
The receipt of governmental and other approvals associated with the
sale of the Chemtura AgroSolutions business and the successful
fulfillment or waiver of all other closing conditions for such a
transaction without unexpected delays or conditions;
-
The successful closing of the sale of the Chemtura AgroSolutions
business and separation of that business from the rest of our
businesses;
-
Risks associated with strategic acquisitions and divestitures; and
-
Other risks and uncertainties described in our filings with the
Securities and Exchange Commission, including Item 1A, Risk Factors,
in our Annual Report on Form 10-K.
These statements are based on our estimates and assumptions and on
currently available information. Our forward-looking statements include
information concerning possible or assumed future results of operations,
and our actual results may differ significantly from the results
discussed. Forward-looking information is intended to reflect opinions
as of the date this press release was issued. We undertake no duty to
update any forward-looking statements to conform the statements to
actual results or changes in our operations.
RECONCILIATION TABLE
|
|
CHEMTURA CORPORATION
|
|
Chemtura AgroSolutions segment
|
|
Reconciliation of GAAP Operating Income to Adjusted EBITDA
|
|
Computation of last twelve months net sales and Adjusted EBITDA
as of June 30, 2013
|
(In millions of dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2012
|
|
|
Less: Six months ended June 30, 2012
|
|
|
Plus: Six months ended June 30, 2013
|
|
|
Last twelve months ended June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Segment Sales
|
|
$
|
409
|
|
$
|
(197
|
)
|
|
$
|
223
|
|
$
|
435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Segment Operating Income
|
|
$
|
65
|
|
$
|
(33
|
)
|
|
$
|
45
|
|
$
|
77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
13
|
|
|
(7
|
)
|
|
|
6
|
|
|
12
|
Non-cash stock-based compensation expense
|
|
|
1
|
|
|
(1
|
)
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Adjusted EBITDA
|
|
$
|
79
|
|
$
|
(41
|
)
|
|
$
|
51
|
|
$
|
89
|
|
|
|
|
|
|
|
|
|
|
|
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|
Copyright Business Wire 2013