Synthomer PLC European Commission clearance for OMNOVA (7010H)
March 26 2020 - 5:17AM
UK Regulatory
TIDMSYNT
RNS Number : 7010H
Synthomer PLC
26 March 2020
Synthomer plc
26th March 2020
Synthomer plc ('Synthomer')
European Commission clearance for OMNOVA acquisition;
Trading update and suspension of dividend
Synthomer is pleased to announce today that the conditions
attached to the European Commission's clearance decision issued on
15(th) January 2020 have been satisfied and no other regulatory
approvals are outstanding for the completion of the acquisition of
OMNOVA Solutions Inc ("OMNOVA"). The acquisition is expected to
complete by 1(st) April 2020. This follows receipt of approval for
the agreed sale of its PYRATEX(TM) VP Latex business to Trinseo.
Completion of the divestment to Trinseo, which represents less than
0.5% of Synthomer 2019 sales, is subject to approval from
competition authorities but this does not impact the completion of
the OMNOVA transaction.
The transaction creates a global speciality chemicals company
with significant scale and a robust platform from which to invest
in future growth. Synthomer becomes a major world-wide player in
water-based polymer solutions with greater customer reach and
strong operational capabilities and will be in an excellent
position to invest in growth, innovation, and people.
The acquisition materially strengthens Synthomer's presence in
North America, as well as increases its presence in Europe and
Asia, including further penetration into the high growth Chinese
market. Synthomer intends to utilise best practices from across the
enlarged Group to improve productivity and reduce costs.
Since announcing the transaction in July 2019, Synthomer has
done as much as possible before completion with strong cooperation
between respective teams meaning that it is ready to move forwards
on integration whilst mindful of the current environment. As
previously announced, and confirmed today, the acquisition is
expected to result in estimated recurring pre-tax cost synergies of
US$29.6 million per annum following completion.
Trading update
To date, the Group has experienced a solid start to the year
with trading in line with 2019 and expectations set out at the time
of Synthomer's FY results. Demand has been especially strong in our
Nitrile Latex business.
Whilst the impact on both production and demand from COVID-19
has been limited to date, the ongoing spread of the virus clearly
presents significant uncertainty. We continue to prioritise the
safety and well-being of our employees around the world whilst
continuing to deliver for customers.
As also announced earlier this month, the Group is well advanced
on plans to realise further efficiencies across the business and
with raw material prices falling, working capital will reduce this
year. Furthermore, with additional capacity at our plants in Asia
and Europe now onstream, capital expenditure will be much lower
than 2019.
Liquidity and Banking covenants
Based on the latest published results of Synthomer and OMNOVA,
the pro forma leverage of the enlarged Group was 2.5x net
debt/EBITDA*.
The new financing facilities, as negotiated on signing the
Merger Agreement in July 2019 and effective at completion, include
the committed unsecured 5 year EUR460m RCF and $260m term loan bank
facilities. These provide the enlarged Group significant leverage
and additional liquidity headroom with the net debt/EBITDA*
leverage covenant (excluding impact of IFRS 16) set at 4.25x for
2020 and 3.75x for 2021, and estimated cash and undrawn facilities
of approximately EUR170m and EUR380m respectively, a total
liquidity of EUR550m.
In addition to these bank facilities, Synthomer also has a
committed unsecured EUR520m bridge in place running through until
October 2021, which will be refinanced appropriately ahead of
this.
The Company also entered into a deal contingent FX hedge to
purchase $480m for a fixed EUR value to mitigate the FX exposure
risk arising on the $ purchase price of OMNOVA.
Dividend suspension
Despite the Group's strong financial position, the uncertainty
relating to COVID-19 means that alongside the efficiency measures
we are taking to preserve cash, the Board has decided not to
recommend the payment of a final dividend for 2019. This decision
will be reviewed later in the year once the outlook becomes
clearer. The Board believes that this is an appropriate and prudent
measure to take as it seeks to preserve Synthomer's strong
liquidity, cashflow and financial position through these uncertain
times.
Commenting, Calum MacLean, CEO of Synthomer said:
"It is very exciting to have reached this point, a
transformational moment in Synthomer's history. Synthomer now has
global reach, a broader product portfolio and increased R&D
capabilities with an exciting platform from which to attract talent
and invest in future growth. We have a clear integration plan for
bringing the two businesses together, which will in turn enable us
to deliver significant synergies.
Clearly these are uncertain times but our significant liquidity
headroom, ongoing efficiency programme and increased focus on ways
to preserve cash, ensure that Synthomer and its highly experienced
team is fully equipped to manage the current environment.
I look forward to working closely with new colleagues around the
world to take Synthomer forward."
*Excluding IFRS 16 Leases.
Enquiries:
Synthomer plc Tel: + 44 7764 859147
Calum MacLean, Chief Executive Officer
Stephen Bennett, Chief Financial
Officer
Tim Hughes, President, Corporate
Development
Teneo Tel: + 44 7703 330269
Charles Armitstead / Matt Denham
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END
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