The combined net purchase price is $1.45 billion (see Attachment 1), representing an 11.1x multiple of last twelve months adjusted EBITDA, or 7.6x including anticipated synergies.
"This will be a truly transformational acquisition for both PolyOne and Clariant customers and employees around the world. Together, we will benefit from the combined ingenuity, passion and expertise of two global leaders in color design, additive technologies and sustainable solutions," said Robert M. Patterson, Chairman, President and Chief Executive Officer, PolyOne Corporation.
Clariant's color and additive masterbatch business, which had sales of $1.15 billion for the last twelve months, includes specialty technologies and solutions for high-growth global end markets, such as consumer, packaging, and healthcare. The Clariant business includes 46 manufacturing operations and technology centers in 29 countries and approximately 3,600 employees, who will join PolyOne's Color, Additives and Inks segment.
"Over the years, we have invested heavily in commercial resources and innovation, emphasizing higher-margin specialty business in less-cyclical end markets. With this acquisition and the recent divestiture of our Performance Products & Solutions (PP&S) segment, we now expect over 85% of pro forma adjusted EBITDA to be generated from specialty applications," said Mr. Patterson.
"The early synergies and EPS accretion certainly underpin the transaction and its initial value financially, but what I am most excited about is the additional upside from the innovation opportunities of our combined businesses," Mr. Patterson added. "Although we are several years into our specialty journey, we should all view this as a landmark acquisition, with our best days to come."
PolyOne will host a conference call and webcast to review the transaction in more detail and discuss key investment highlights including:
- Creation of a premier provider of sustainable solutions with over 85% of adjusted EBITDA from specialty formulations and approximately $4 billion in annual revenue.
- Both businesses offer leading portfolios of materials and supporting services that are aligned with the megatrends of the future, including sustainable solutions for alternative energy, reduced material requirements for packaging, improved recyclability and light-weighting.
- Combined geographic footprint will provide comprehensive, global availability of specialty materials and services for customers around the world.
- The transaction, pro forma for anticipated synergies of $60 million, is expected to add $0.85 to adjusted EPS, excluding the impact of step-up depreciation and amortization related to purchase accounting.
- PolyOne intends to finance this transaction through a combination of cash on hand, including capital generated from the recent divestiture of its PP&S segment, and proceeds from the issuance of senior unsecured notes and approximately $450 million of equity.
- Modest initial net debt to adjusted EBITDA leverage of 3.5x (3.1x pro forma for synergies) will be reduced to below 3x within two years.
The acquisition of Clariant's color and additive masterbatch business has been approved by the Boards of Directors at the companies and is expected to close in the middle of next year as it is subject to the satisfaction or waiver of customary closing conditions, including the receipt of regulatory approvals in various global jurisdictions. Committed financing for the acquisitions is being provided by Citi, Morgan Stanley & Co. LLP, and Wells Fargo. Jones Day served as outside legal counsel to PolyOne.