(Note: All dollar amounts Canadian dollars unless otherwise noted)
-
Purchase price of US$860 million representing a transaction multiple of
7.8x LTM EBITDA (7.2x including US$10 million of expected cost
synergies)
-
Chemtrade pro forma LTM Revenue and EBITDA of approximately $1.3 billion
and $255 million, respectively
-
On a pro forma LTM basis:
-
The Transaction is approximately 17% accretive to DCPU
-
Payout ratio reduced to approximately 50% and distributions maintained
at $1.20 per unit per year
TORONTO, Dec. 4, 2013 /CNW/ - Chemtrade Logistics Income Fund (TSX:
CHE.UN) ("Chemtrade") announced today that it has entered into a
definitive agreement to acquire Parsippany, New Jersey-based General
Chemical Holding Company ("General Chemical") for US$860 million in
cash (the "Purchase Price"), subject to certain adjustments as
described below (the "Transaction"). The Transaction will be structured
as a merger in accordance with the laws of the State of Delaware pursuant to which Chemtrade will acquire all of the outstanding shares
of ASP GT Holding Corp., General Chemical's parent company, from
certain funds controlled by American Securities LLC, a private equity
firm.
"This is a historic event for Chemtrade. The acquisition of General
Chemical adds significant size, scale and scope to Chemtrade's existing
product and service platform," said Chemtrade President and Chief
Executive Officer, Mark Davis. "General Chemical has strong portfolio
alignment with our current business, enhancing our existing sulphuric
acid geographic footprint and greatly expanding our water treatment
business so it now extends across most of North America. The
acquisition of General Chemical also moves Chemtrade into new but
related product categories and end markets, and positions Chemtrade to
capitalize on new growth opportunities."
General Chemical is a North American manufacturer of a broad portfolio
of inorganic chemical products with three business units: Water
Treatment Chemicals, Sulphuric Acid and Specialty Chemicals. The
business operates 45 facilities across the United States and Canada,
and employs approximately 540 people. General Chemical serves a diverse
customer base in a variety of end markets including municipal water
treatment, general industrial production, pulp and paper, food and
beverage, agriculture, and pharmaceuticals. No single customer
accounted for more than 8% of total 2012 revenue. For the last twelve
months ended September 30, 2013 ("LTM"), General Chemical generated
total revenue of US$390 million and Adjusted EBITDA of US$110 million,
resulting in an Adjusted EBITDA margin of 28%.
The acquisition of General Chemical is consistent with Chemtrade's
four-pronged strategy:
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Growth
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Adds significant scale to Chemtrade's existing platform
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Meaningful growth opportunities in both Water Treatment Chemicals and
Specialty Chemicals
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Operational Excellence
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North American manufacturer with broad product portfolio of inorganic
chemical solutions
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Enhanced scale allows continued development of best practices to
continually improve asset quality and efficiency
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Attractive Business Model
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High-quality earnings consistent with Chemtrade's risk mitigating
business model derived through a diverse customer base, risk-shared
contracts and market leading positions across different geographies
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Financial Prudence
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Industry-leading EBITDA margins and robust free cash flow conversion
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Highly accretive to distributable cash per unit ("DCPU") and reduces
payout ratio
-
Maintains strong balance sheet
Financial Highlights
The Transaction is approximately 17% accretive to Chemtrade's DCPU on a
pro forma basis for the twelve month period ended September 30, 2013,
including synergies. Chemtrade's pro forma payout ratio would have been
approximately 50% over the same period. The Transaction is expected to
deliver operating cost synergies of US$10 million through reduction of
duplicate services, particularly certain head office functions. The
synergies are expected to be fully realized within one year from the
closing of the Transaction. On a combined basis, the pro forma company
would have generated LTM revenue of approximately $1,254 million and
LTM EBITDA (before synergies) of approximately $255 million.
Financing of the Transaction
Chemtrade intends to finance the Purchase Price through a combination
of: (i) US$1.0 billion syndicated senior secured credit facilities
consisting of a US$600 million term loan and a US$400 million revolver
with a US$150 million optional accordion; and (ii) an approximate $300
million equity raise. At closing of the Transaction, the term loan is
expected to be fully drawn and the revolver is expected to have
approximately US$216 million drawn, primarily for the refinancing of
Chemtrade's existing credit facility. If the equity raise is not
completed prior to closing, Bank of Montreal, BMO Capital Markets and
The Bank of Nova Scotia have provided Chemtrade with fully committed
credit facilities for the full Purchase Price plus transaction
expenses. At closing, and assuming completion of the equity raise,
Chemtrade's senior secured debt to LTM EBITDA ratio is expected to be
approximately 3.3x, which is well below the financial covenants
contained in the credit facilities.
Purchase Price Adjustments
The Purchase Price is subject to a customary working capital adjustment.
In addition, the Purchase Price will be adjusted based on a formula for
any variance between the one day volume weighted average unit price of
Chemtrade for the second business day after the date upon which certain
financial statements are delivered to Chemtrade by General Chemical
(the "Target Price") and the reference price of $17.00 per unit (the
"Reference Price"). If the Target Price is less than the Reference
Price, the Purchase Price will be reduced, or if the Target Price is
higher than the Reference Price, the Purchase Price will be increased.
For every $0.50 difference between the Target Price and the Reference
Price, the Purchase Price will be adjusted by approximately 1%.
Closing of the Transaction and Other Information
Closing of the Transaction is subject to customary conditions, including
the receipt of relevant regulatory approvals, including
Hart-Scott-Rodino approval.
There can be no assurance that the Transaction or the equity raise will
be completed. This press release does not constitute a solicitation of
an offer to purchase, or an offer to sell, any securities.
Distributions
Following closing of the Transaction, Chemtrade intends to maintain its
current annual distribution rate of $1.20 per unit. Holders of units
who are non-residents of Canada will be required to pay all withholding
taxes payable in respect of any distributions of income by the Fund.
Advisors and Counsel
BMO Capital Markets and Jefferies LLC are acting as financial advisors
to Chemtrade. Osler, Hoskin & Harcourt LLP and Covington & Burling LLP
are legal advisors to Chemtrade.
Conference Call and Webcast
Chemtrade will hold a conference call on December 4, 2013 at 10:00 a.m.
ET to review the acquisition. To access the conference call by
telephone, dial 416-764-8652 or 1-888-396-8063. Please connect
approximately 15 minutes prior to the beginning of the call to ensure
participation. The conference call will be archived for replay until
January 4, 2014. To access the archived conference call, dial
416-764-8691 or 1-877-674-6060 and enter the reservation number 691955.
A live audio webcast of the conference call and slide presentation will
be available at www.chemtradelogistics.com and www.newswire.ca.
About Chemtrade
Chemtrade operates a diversified business providing industrial chemicals
and services to customers in North America and around the world.
Chemtrade is one of North America's largest suppliers of sulphuric
acid, liquid sulphur dioxide and sodium hydrosulphite, and a leading
processor of spent acid. Chemtrade is also a leading regional supplier
of sulphur, sodium chlorate, phosphorous pentasulphide, zinc oxide, and
water treatment chemicals. Chemtrade also provides industrial services
such as processing hydrogen sulphide and other by-products and waste
streams.
Non-IFRS and Non-U.S. GAAP Measures
This news release makes reference to certain non-IFRS and non-U.S. GAAP
measures. These non-IFRS measures are not recognized measures under
IFRS, do not have a standardized meaning prescribed by IFRS and are
therefore unlikely to be comparable to similar measures presented by
other companies. Rather, these measures are provided as additional
information to complement IFRS measures by providing further
understanding of operations from management's perspective. Accordingly,
non-IFRS measures should never be considered in isolation nor as a
substitute for analysis of financial information reported under IFRS.
Management presents non-IFRS measures, specifically EBITDA, adjusted
EBITDA, adjusted EBITDA margin, Distributable Cash after Maintenance
Capital Expenditures per unit ("DCPU") and payout ratio, as it believes
these non-IFRS measures are frequently used by securities analysts,
investors and other interested parties as measures of financial
performance and to provide a supplemental measure of operating
performance and thus highlight trends that may not otherwise be
apparent when relying solely on IFRS financial measures. The
definitions of the non-IFRS measures contained in this release are as
follows:
EBITDA is calculated as net earnings before any deduction for net
finance costs, taxes, depreciation and amortization and other charges
such as unrealized foreign exchange gains and losses.
Adjusted EBITDA has been calculated as EBITDA adjusted upwards in
aggregate by approximately US$2 million comprised of: (i) expenses that
are not expected to continue after the acquisition, such as management
fees and non-cash compensation items; and (ii) items which are
considered by management as not indicative of underlying business
operating performance such as gain/loss on the disposal of assets.
Adjusted EBITDA margin is adjusted EBITDA divided by revenue.
Distributable Cash after Maintenance Capital Expenditures per unit is
Distributable Cash after Maintenance Capital Expenditures divided by
the number of Chemtrade's equity units outstanding. Distributable Cash
after Maintenance Capital Expenditures is cash flow from operating
activities adjusted by removing changes in non-cash working capital and
other items, including contributions to frozen defined benefit pension
plans and other post-employment benefit plans and by deducting
maintenance capital expenditures. Maintenance capital expenditures are
all capital expenditures other than capital expenditures that are: (a)
pre-funded, usually as part of a significant acquisition and related
financing; (b) considered to expand the capacity of Chemtrade's
operations; (c) significant environmental capital expenditures that are
considered to be non-recurring; or (d) capital expenditures to be
reimbursed by a third party.
Payout ratio equals distributions paid to unit holders divided by
Distributable Cash after Maintenance Capital Expenditures.
Caution Regarding Forward-Looking Statements
Certain statements contained in this news release constitute
forward-looking statements within the meaning of certain securities
laws, including the Securities Act (Ontario). Forward-looking
statements can be generally identified by the use of words such as
"anticipate", "continue", "estimate", "expect", "expected", "intend",
"may", "will", "project", "plan", "should", "believe" and similar
expressions. Specifically, forward-looking statements in this news
release include statements respecting certain future expectations
about: the Fund's ability to close the acquisition transaction, its
structure, timing and the amount of the Purchase Price after
adjustment; how the acquisition is to be financed, the amount to be
drawn and the uses thereof; the Fund's ability to accomplish an equity
raise and its timing; the ability of the Fund to achieve certain
synergies, their timing and amount; the Fund's ability to meet its debt
covenants and their expected level; the ability of the Fund to maintain
its distribution rate and the amount of distributions. Forward-looking
statements in this news release describe the expectations of the Fund
and its subsidiaries as of the date hereof. These statements involve
known and unknown risks, uncertainties and other factors that may cause
actual results or events to differ materially from those anticipated in
such forward-looking statements for a variety of reasons, including
without limitation the risks and uncertainties detailed under the "RISK
FACTORS" section of the Fund's latest Annual Information Form and the
"RISKS AND UNCERTAINTIES" section of the Fund's most recent
Management's Discussion & Analysis.
Although the Fund believes the expectations reflected in these
forward-looking statements and the assumptions upon which they are
based are reasonable, no assurance can be given that actual results
will be consistent with such forward-looking statements, and they
should not be unduly relied upon. With respect to the forward-looking
statements contained in this news release, the Fund has made
assumptions regarding: there being no significant disruptions affecting
the operations of the Fund and its subsidiaries, whether due to labour
disruptions, supply disruptions, power disruptions, transportation
disruptions, damage to equipment or otherwise; the ability of the Fund
to obtain products, raw materials, equipment, transportation, services
and supplies in a timely manner to carry out its activities and at
prices consistent with current levels or in line with the Fund's
expectations; the timely receipt of required regulatory approvals; the
cost of regulatory and environmental compliance being consistent with
current levels or in line with the Fund's expectations; the ability of
the Fund to successfully access tax losses and tax attributes; the
ability of the Fund to obtain financing on acceptable terms; currency,
exchange and interest rates being consistent with current levels or in
line with the Fund's expectations; and global economic performance.
The Fund disclaims any intention or obligation to update any
forward-looking statement even if new information becomes available, as
a result of future events or for any other reason. The forward-looking
statements contained herein are expressly qualified in their entirety
by this cautionary statement.
Further information can be found in the disclosure documents filed by
Chemtrade Logistics Income Fund with the securities regulatory
authorities, available at www.sedar.com.
SOURCE Chemtrade Logistics Income Fund