10 February 2017
Elementis significantly increases the
scale of its personal care business with US$360 million acquisition of SummitReheis
Acquisition adds a high quality
business with significant potential for further growth in the
attractive personal care segment
Elementis plc (“Elementis” or the “Group”) today announces 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”). 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
US$134 million and underlying EBITDA
of approximately US$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 per cent. 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
-
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 ~US$200
million personal care business of Elementis with critical
mass and significant growth prospects
-
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)
-
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
-
Elementis to remain prudently financed post acquisition
SummitReheis and Elementis
SummitReheis operates in a highly attractive, growing segment of
the personal care market. Anti-perspirant products are experiencing
growing demand in developed markets, particularly the US, driven by
demand for premium and higher efficacy products. In emerging
markets, particularly Latin
America, India and
South East Asia, anti-perspirant
products are benefitting from increasing market penetration driven
by changing lifestyle trends and increased discretionary income.
SummitReheis’ primary manufacturing operations are in North America and Europe with approximately 70% of revenue from
these markets. The combination of SummitReheis with Elementis’
global distribution networks creates the opportunity to drive
growth in emerging markets.
As the leading global producer of active ingredients for
anti-perspirants, SummitReheis has built long-term relationships
with key consumer product companies. Elementis’ existing personal
care business is part of its Specialty Products division and
supplies hectorite and Rheoluxe® rheology modifiers that enhance
the effectiveness of SummitReheis’ products. SummitReheis will be
merged with Elementis’ existing personal care activities, creating
a business with approximately US$200
million of annual sales, representing approximately 25 per
cent. of Elementis’ pro forma combined sales and in excess of 30
per cent. of Elementis’ pro forma combined operating profit before
amortisation.
Information regarding SummitReheis
SummitReheis’ primary focus is the manufacture and sale of
aluminium and zirconium based active ingredients for
anti-perspirant products to global consumer products companies. It
is the global leader in the fast growing anti-perspirant actives
(“AP actives”) market with locations in the US, Europe and Asia. Its technologies provide the base
ingredients providing sweat-blocking characteristics in all types
of anti-perspirant products such as aerosols, sticks and roll-ons.
Over 60 per cent. of SummitReheis’ sales are from its AP actives
business.
SummitReheis’ Pharma Actives business is a leading European
producer of the active ingredients for indigestion and heartburn
remedies. These products have similar chemistry and manufacturing
processes to the core business and long-term customer relationships
in the pharmaceutical industry. SummitReheis’ Specialty Dental
business manufactures dental plasters, alloys, discs and moulding
materials that are used to make dental crowns, bridges, replacement
teeth and in other applications and has a leading position in
Germany.
SummitReheis is headquartered in Huguenot, New York. In June 2015, SummitReheis acquired the European AP
actives, pharma and dental businesses of B.K. Giulini.
SummitReheis’ financial profile
For the year ended 31 December
2015, SummitReheis reported revenue of US$103 million, EBITDA of US$15 million and operating income of
US$8 million. Pro forma for a full
year contribution from the acquired B.K.
Giulini businesses, SummitReheis would have reported
underlying EBITDA of approximately US$25
million in the year ended 31 December
2015. As at 31 December 2015,
SummitReheis had total assets of US$208
million and net assets of US$12
million.
For the year ended 31 December
2016, SummitReheis is expected to report revenue of
US$134 million and underlying EBITDA
of approximately US$28 million.
Transaction details and timing
Completion of the acquisition is expected to take place in the
second quarter of 2017 following receipt of anti-trust clearances
in the US and Germany.
Elementis intends to fund the acquisition through existing cash
resources and US$475 million of new
debt facilities which will also be used to refinance Elementis’
existing debt facilities. The new debt will be provided through a
new fully underwritten US$275 million
revolving credit facility and US$200
million term loan facility. The new debt facilities have a 5
year term and are on terms in line with the Group’s existing
facilities. Elementis will remain prudently financed post
acquisition.
Conference call
Paul Waterman, Chief Executive
Officer, and Ralph Hewins, Chief
Financial Officer, will hold an analyst and investor call today at
08:30a.m. UK time to discuss this
announcement. To participate in the conference call, please dial:
UK +44 (0)20 3139 4830; UK toll free 0808 237 0030 or click here
for international numbers:
http://events.arkadin.com/ev/docs/NE_FEL_Events_International_Access_List.pdf.
The participant PIN code is 33260441#.
A copy of the presentation slides will be available at:
https://arkadin-event.webex.com/arkadin-event/onstage/g.php?MTID=e4da989b68546419fb2a9e73a4634bb83
The event password is: 682839.
Press releases can also be found on the website
www.elementisplc.com
For further information on this release please contact:
Financial Advisers
Gleacher Shacklock LLP
Edward Cumming Bruce / Mark Hammond / Tom
Quinn
T: +44 (0)20 7484 1120
Natrium Capital
Alasdair Nisbet
T: +44 (0)20 3574 4635
Media Contacts
FTI Consulting
Deborah Scott / Matthew Cole
T: +44 (0)20 3727 1000
Editor’s notes
SummitReheis is a leading global specialty chemicals platform
that produces a range of critical active ingredients and materials
tailored for use in personal care, pharmaceutical and dental
products. The company was founded in 1940 and is headquartered in
Huguenot, New York, US.
- SummitReheis’ AP actives business is the global leader
in the production of active ingredients in anti-perspirant products
and accounted for 62% of SummitReheis’ pro forma revenue for the
year ended 31 December 2015
- SummitReheis’ Pharma actives business produces
sucralfate, antacid pastes and powders which are critical
components of regulated pharmaceutical products sold both
over-the-counter and with prescription. The Pharma actives business
provides ingredients used in antacids and gastrointestinal remedies
utilising similar chemistry and manufacturing plant as the AP
actives business in Germany. It
generated 18% of SummitReheis’ pro forma revenue for the year ended
31 December 2015
- SummitReheis’ Specialty Dental business manufactures
dental plasters alloys/discs and moulding materials that are used
to make dental crowns, bridges and replacement teeth and in other
applications. It generated 20% of SummitReheis’ pro forma revenue
for the year ended 31 December
2015
Anti-perspirants reduce sweat by a significant amount and
deodorants use biocides and scent to mask the effects of sweating.
SummitReheis’ AP active ingredients are based on either ACH
(Aluminium Chlorohydrate) or ZAG (Zirconium Aluminium Glycine).
They are used in all of the key types of anti-perspirant products:
sticks, roll-ons and aerosols. In the US the preferred
anti-perspirants are sticks whilst in Europe they are aerosols. ACH and ZAG are used
in most products however ZAG is not used in aerosols.
Elementis’ hectorite clays or gels are used in anti-perspirants
in conjunction with SummitReheis’ products. Specifically, the
hectorite clays enable the effective use of ACH in aerosols, the
highest growth application. Hectorite acts as a rheology modifier,
providing uniformity in application and aiding in the suspension of
aluminium salts within aerosol anti-perspirants. As well as acting
as an in-process suspension aid, the use of hectorite also reduces
the undesirable appearance of armpit staining on shirts.
SummitReheis has strong and long-standing relationships with the
top global manufacturers of anti-perspirants and deodorants. The AP
actives business serves a broad customer base from small, regional
suppliers to some of the leading global personal care
manufacturers. The Pharma actives business supplies both
multinational pharmaceutical companies and regional pharmaceutical
suppliers selling OTC and prescription antacids. For Specialty
Dental the business supplies a range of direct customers,
distributors and agents across varied markets, including dental
laboratory equipment, medical bandages and 3D printing.
SummitReheis supplies its customers globally. Its revenue is
well diversified, with 41% in Europe, 33% in North
America and 26% in the rest of the world (for the year ended
31 December 2015). Its manufacturing
operations are in the US, Germany,
UK and China. It also has plans to
build a manufacturing capability in Brazil and Thailand. SummitReheis’ geographical spread of
operations is complementary to that of Elementis. SummitReheis
employs approximately 270 people.