29th Jun 2006 12:05
Croda International PLC29 June 2006 Not for release, publication or distribution, in whole or in part, in or into orfrom Australia, Canada, Japan, Republic of South Africa or the United States ofAmerica CRODA ANNOUNCES THE ACQUISITION OF UNIQEMA FROM ICI London, June 29, 2006. Croda International Plc ("Croda") announces theacquisition of Uniqema, a division of Imperial Chemical Industries Plc ("ICI")(the "Acquisition") for a total consideration of £410 million on a cash and debtfree basis. At Completion, Croda will pay ICI £370 million in cash and willassume £40 million of unfunded post-retirement benefit liabilities. As part ofthe Completion mechanics, there will be an adjustment for working capital and anadjustment for any post-retirement benefit liabilities, which will be funded,net of tax, by ICI. Uniqema is a global manufacturer and supplier of base oleochemicals andspecialities used as additives in a wide variety of consumer care markets. Inthe year ended 31 December 2005 it generated sales of £626 million, 66 per cent.from specialities and 34 per cent. from base oleochemicals, with EBITDA of £49million. The Directors of Croda believe that the Acquisition fulfils a long termstrategic goal for the Company, providing an enhanced global platform from whichto pursue future growth opportunities. Highlights of the Acquisition: • Strengthens Croda's position as a leading global oleochemical specialities manufacturer • Strengthens global position in consumer care products • Brings complementary products and technologies, e.g. alkoxylates, sunscreens and crop care • Strengthens Croda's presence in key growth markets, such as India • Expected to be EPS neutral in the year ending 31 December 2007, and significantly EPS enhancing in the year ending 31 December 2008 (see note 1) • Significant synergies estimated to be at least £20 million per annum in the year ending 31 December 2008 • Restructuring will create opportunities for additional earnings improvement Croda has a successful track record of restructuring chemical assets. Overrecent years, the current management has led a focused strategic repositioningof Croda's business. Croda's management believes that the application of asimilar strategy has the potential to unlock significant value following theAcquisition. The Acquisition constitutes a "Reverse Takeover" under the UK Listing Rules byvirtue of its size and requires the approval of Croda Shareholders, which willbe sought at an Extraordinary General Meeting that is anticipated to be held inAugust. Given that it is a "Reverse Takeover", Croda's Ordinary Shares will besuspended from trading at the time of this announcement, pending the publicationof a Prospectus for the Enlarged Group. It is anticipated that the Prospectuswill be posted to Croda Shareholders in August 2006 and that trading in Crodashares will recommence shortly thereafter. The Circular inviting Shareholders to vote at an Extraordinary General Meetingis expected to be posted to Croda Shareholders during August 2006. TheAcquisition is subject to Croda Shareholders' approval and obtaining therelevant Competition Clearances. Croda intends to fund the Acquisition through New Debt Facilities. In addition,Croda may implement an Equity Placing of up to 10 per cent. of its issued sharecapital, from shares held in treasury, once trading has re-commenced. However,neither the New Debt Facilities nor the Acquisition are conditional upon theEquity Placing. Commenting on the Acquisition, Martin Flower, Chairman of Croda, said: "Croda has had a strategy of growing both organically and through acquisitionfor a long time. We have been very disciplined in looking at possibleacquisitions. The Board and I are convinced that this acquisition will createsignificant shareholder value and provide an exciting platform for Croda'sfuture growth." Commenting on the Acquisition, Mike Humphrey, Group Chief Executive of Croda,said: "This is an exciting step change in the Croda growth story. Acquiring Uniqemahas clear industrial logic and a compelling financial case. It is a greatopportunity for Croda's experienced management team to combine with Uniqema'stalented people to create a new company with a great future." Croda will be holding a presentation to analysts at 13.00 (London time) on June29, 2006 at Financial Dynamics, Holborn Gate, 26 Southampton Buildings, LondonWC2. There will be a dial-in facility for the presentation on 0845 113 0049.The investor presentation will also be available on Croda's web-site(www.Croda.com). In addition, Croda has set-up an investor helpline for CrodaShareholders who have any queries regarding the Acquisition. The helplinenumber in the UK is 0870 162 3177 and from outside the UK is +44 208 639 3177. Merrill Lynch is acting as financial adviser and corporate broker to Croda. This summary should be read in conjunction with the full text of the followingannouncement. Note 1. This statement is not intended to constitute a profit forecast for thefinancial years ending 31 December 2007 and 31 December 2008, nor for any otherperiod. Nor should the statements be interpreted to mean that earnings orearnings per share will necessarily be greater or lesser than those for therelevant preceding financial period for Croda. Rather this statement should beconstrued as a reference to an enhancement above the earnings that mightotherwise have been earned during the relevant financial period. For further information, please contact: Croda International Plc Tel: +44 20 7831 3113 (June 29, 2006) Mike Humphrey Tel: +44 1405 860 551 (thereafter) Sean Christie Merrill Lynch Tel: +44 207 628 1000 Lars Ingemarsson Ken McLaren Simon Fraser (Corporate broking) Andrew Fairclough (Corporate broking) Financial Dynamics Tel: +44 20 7831 3113 Andrew Dowler Ben Foster This announcement has been issued by Croda and is the sole responsibility ofCroda. Merrill Lynch is acting for Croda in connection with the proposed Acquisitionand no one else and will not be responsible to anyone other than Croda forproviding the protections afforded to clients of Merrill Lynch nor for providingany advice in relation to the Acquisition. This announcement is for information only and does not constitute an offer or aninvitation to acquire or dispose of any securities or investment advice or aninducement to enter into investment activity. This announcement does notconstitute an offer to sell or issue or the solicitation of an offer to buy oracquire Croda securities in any jurisdiction. The distribution of this announcement may be restricted by law. Persons intowhose possession this announcement comes are required by Croda to informthemselves about and to observe any such restrictions. This announcement includes 'forward-looking statements'. These forward-lookingstatements contain the words "anticipate", "believe", "intend", "estimate", "expect" and words of similar meaning. All statements other than statements ofhistorical facts included in this announcement, including, without limitation,those regarding Croda's financial position, business strategy, plans andobjectives of management for future operations (including development plans andobjectives relating to Croda's products and services) are forward-lookingstatements. Such forward-looking statements involve known and unknown risks,uncertainties and other important factors that could cause the actual results,performance or achievements of Croda to be materially different from futureresults, performance or achievements expressed or implied by suchforward-looking statements. Such forward-looking statements are based onnumerous assumptions regarding Croda's present and future business strategiesand the environment in which Croda will operate in the future. Theseforward-looking statements speak only as at the date of this announcement. Crodaexpressly disclaims any obligation or undertaking to disseminate any updates orrevisions to any forward-looking statements contained herein to reflect anychange in Croda's expectations with regard thereto or any change in events,conditions or circumstances on which any such statement is based. CRODA ANNOUNCES THE ACQUISITION OF UNIQEMA FROM ICI Introduction Croda announces the acquisition of Uniqema, a division of ICI for a totalconsideration of £410 million on a cash and debt free basis. At Completion,Croda will pay ICI £370 million in cash and will assume £40 million of unfundedpost-retirement benefit liabilities. As part of the Completion mechanics, therewill be an adjustment for working capital and an adjustment for anypost-retirement benefit liabilities, which will be funded, net of tax, by ICI. Rationale for the Acquisition Uniqema complements Croda's existing operations and adds further scale anddiversity to its current specialities product offering, in particular withincore consumer care markets. The Acquisition will generate scope for synergycreation, whilst integration and restructuring opportunities will createpotential for accelerated earnings growth. Croda has a successful track record of restructuring chemical assets. Overrecent years, the current management has led a focused strategic repositioningof Croda's business. In 1998 only 35 per cent. of sales were derived fromconsumer care markets, with the remainder derived from industrial specialities.By 2005 sales derived from consumer care had increased to 68 per cent. of saleswith a corresponding EBITDA margin increase from 15.5 per cent. to 22.0 percent. over the same period. Croda management believes that a similar strategyhas the potential to unlock significant value following the Acquisition. Information on Uniqema Uniqema is a global manufacturer and supplier of base oleochemicals andspecialities used as ingredients in a wide variety of markets including personalcare, healthcare, homecare, lubricants and coatings. In 2005, it generatedsales of £626 million, of which 66 per cent. (£415 million) were specialitiesand 34 per cent. (£211 million) were base oleochemicals. Uniqema hasapproximately 2,500 employees worldwide with 13 manufacturing facilities inEurope, the US and Asia. Uniqema's turnover and EBITDA for the year ended 31 December 2005 under IFRSwere £626 million and £49 million respectively. In the first quarter of 2006,Uniqema reported an increase in turnover of 2 per cent. to £166 million andEBITDA was flat at £13 million. On this basis, Uniqema's last twelve monthsEBITDA to 31 March 2006 was £49 million. As at 31 December 2005 Uniqema hadgross assets of approximately £461 million. Information on Croda Croda is a manufacturer of speciality ingredients for the global consumerpersonal care, healthcare and homecare markets. Croda also supplies ingredientsfor a variety of other markets including the plastics industry. Croda employsaround 1,600 employees in 26 countries. For the 12 months to 31 December 2005Croda generated turnover of £306 million and EBITDA of £66 million. Financial effects of the Acquisition The Directors of Croda expect the Acquisition to be EPS neutral in the yearending 31 December 2007, and significantly EPS enhancing in the year ending 31December 2008 (see note 1). Also, the Directors expect the return on investmentto exceed the Croda group's weighted average cost of capital for the year ending31 December 2008 and onwards. Synergies are estimated to be at least £20million per annum by December 2008 as a result of the Acquisition. Objectives and strategy of the Enlarged Group The Board of Directors of Croda believes that the Enlarged Group will benefitfrom increased manufacturing capacity in continental Europe, a reinforcedposition in the North American market and an expanded Asian footprint. The Enlarged Group's strategic priorities will be to: • improve efficiency and secure significant cost savings • re-focus on higher growth markets and higher margin products • rationalise manufacturing • accelerate debt repayment through selective disposals continue to focus on cash generation Principal elements of the Acquisition The consideration is being financed from New Debt Facilities as arranged byBarclays and the Royal Bank of Scotland. Croda may implement an Equity Placingof shares held in treasury equivalent of up to 10 per cent. of the currentoutstanding Ordinary Share Capital of Croda once trading has re-commenced.However, neither the New Debt Facilities nor the Acquisition are conditionalupon the Equity Placing. The Acquisition is structured principally as a sale of shares, with oneprincipal exception being the acquisition of the site at Thane in India whichwill be effected as an asset sale from its current owners, ICI India. Thistransaction will be conditional upon the approval of the shareholders of ICIIndia, of which ICI holds 51 per cent. of the voting capital. Closing of thispart of the transaction is anticipated to take place later this year. TheSpanish business will also be acquired by way of an asset purchase. ICI has given a range of warranties and indemnities to Croda in respect ofUniqema and its subsidiaries and their businesses which are conventional for anacquisition of this nature. Uniqema and Croda will conduct their respectivebusinesses in the ordinary course between Signing and Completion. Croda will beconsulted by Uniqema on all major business decisions and developments duringthis period. Dividend policy It is the Directors' current intention that Croda will maintain a similardividend policy to that adopted by it as at the date of this announcement. Croda's dividend policy is to ensure that Croda Shareholders continue to benefitdirectly from the successful growth of the Enlarged Group, while providingsufficient funds for investment in future growth. Employees Croda and Uniqema currently employ approximately 4,100 people in aggregateworldwide. Croda believes the Enlarged Group will provide many opportunitiesfor both Croda and Uniqema employees. The existing employment terms andconditions, including pension rights, of Uniqema's employees, will beappropriately safeguarded. Approvals, implementation and timetable The Acquisition constitutes a "Reverse Takeover" under the UK Listing Rules byvirtue of its size and requires the approval of Croda Shareholders, which willbe sought at an Extraordinary General Meeting that is anticipated to be held inAugust. Given that it is a "Reverse Takeover", Croda's Ordinary Shares will besuspended from trading at the time of this announcement, pending the publicationof a Prospectus for the Enlarged Group. It is anticipated that the Prospectuswill be posted to Croda Shareholders in August 2006 and that trading in Crodashares will recommence shortly thereafter. The Circular inviting Shareholders to vote at an Extraordinary General Meetingis expected to be posted to Croda Shareholders during August 2006. TheAcquisition is subject to Croda Shareholders' approval and obtaining therelevant mandatory Competition Clearances. Note 1. This statement is not intended to constitute a profit forecast for thefinancial years ending 31 December 2007 and 31 December 2008, nor for any otherperiod. Nor should the statements be interpreted to mean that earnings orearnings per share will necessarily be greater or lesser than those for therelevant preceding financial period for Croda. Rather this statement should beconstrued as a reference to an enhancement above the earnings that mightotherwise have been earned during the relevant financial period. This announcement has been issued by Croda and is the sole responsibility ofCroda. Merrill Lynch is acting for Croda in connection with the proposed Acquisitionand no one else and will not be responsible to anyone other than Croda forproviding the protections afforded to clients of Merrill Lynch nor for providingany advice in relation to the Acquisition. This announcement is for information only and does not constitute an offer or aninvitation to acquire or dispose of any securities or investment advice or aninducement to enter into investment activity. This announcement does notconstitute an offer to sell or issue or the solicitation of an offer to buy oracquire Croda securities in any jurisdiction. The distribution of this announcement may be restricted by law. Persons intowhose possession this announcement comes are required by Croda to informthemselves about and to observe any such restrictions. This announcement includes 'forward-looking statements'. These forward-lookingstatements contain the words "anticipate", "believe", "intend", "estimate", "expect" and words of similar meaning. All statements other than statements ofhistorical facts included in this announcement, including, without limitation,those regarding Croda's financial position, business strategy, plans andobjectives of management for future operations (including development plans andobjectives relating to Croda's products and services) are forward-lookingstatements. Such forward-looking statements involve known and unknown risks,uncertainties and other important factors that could cause the actual results,performance or achievements of Croda to be materially different from futureresults, performance or achievements expressed or implied by suchforward-looking statements. Such forward-looking statements are based onnumerous assumptions regarding Croda's present and future business strategiesand the environment in which Croda will operate in the future. Theseforward-looking statements speak only as at the date of this announcement. Crodaexpressly disclaims any obligation or undertaking to disseminate any updates orrevisions to any forward-looking statements contained herein to reflect anychange in Croda's expectations with regard thereto or any change in events,conditions or circumstances on which any such statement is based. Appendix I: Summary of the terms and conditions of the Acquisition documents and the New Debt Facilities The Acquisition Agreement The Acquisition Agreement is the umbrella agreement governing the relationshipbetween ICI and Croda in respect of the Acquisition. In addition to theAcquisition Agreement, there will be a number of local agreements which willmechanically transfer assets or shares as the case may be in each relevantjurisdiction. With regard to certain other jurisdictions, the Indian operation is owned by ICIIndia, a company listed on the Indian Stock Exchange, whose majority shareholderis ICI. In addition, the Uniqema business also has a joint venture in each ofKorea and Indonesia. Croda will assume ICI's interests in those joint ventures. The total consideration is £410 million on a cash and debt free basis. AtCompletion, Croda will pay ICI £370 million in cash and will assume £40 millionof unfunded post-retirement benefit liabilities. As part of the Completionprocedures, there will be an adjustment for working capital and an adjustmentfor any additional post-retirement benefit liabilities, which will be funded netof tax by ICI. The Acquisition Agreement is conditional on several mandatory anti trustclearances. Croda have agreed to give whatever appropriate undertakings arerequired by any anti trust authority to ensure that Completion can take place. The Acquisition Agreement is also conditional upon Croda's Shareholder approval.Completion will take place at the end of the month in which the anti trust andshareholder approval conditions are satisfied. As Indonesian and Koreancompletions are subject to obtaining consents with local JV partners, thoselocal completions will take place at the end of the month in which thoseconsents have been obtained. Risk however will pass in relation to Korea andIndonesia at Completion. In the case of India, it will be necessary to obtainthe shareholder approval of ICI India to the transfer and Indian completion willfollow shortly thereafter. Again risk will pass on Completion. To the extentand in the unlikely event that Indonesian, Korean or Indian completions do nottake place by 31 March 2007, those assets will not transfer. Deed of restrictive covenant At Completion, ICI will enter into a Deed of restrictive covenant, pursuant towhich, subject to certain limited exceptions, it will agree that for a period ofthree years it will not to carry on the same activities as those carried on bythe Uniqema business at Completion. Transitional services agreement At Completion, Croda and ICI will enter into a transitional services agreement,pursuant to which ICI will provide transitional services to Croda (and incertain limited cases, Croda will provide transitional services to ICI) toensure an orderly transition of the Uniqema business into Croda's ownership. Awide range of services will be provided for varying lengths of time. The precisescope, duration and pricing of these services will be agreed prior tocompletion. Deed of tax covenant At Completion, Croda and ICI will enter into a deed of tax covenant, pursuant towhich, subject to certain limited exceptions and limitations, for a period of 7years, ICI will indemnify Croda on a pound for pound basis for any taxliabilities arising before Completion. IP documents At Completion, Croda and ICI will enter into intellectual property ("IP")documents pursuant to which Croda will acquire the IP used in the Uniqemabusiness, either through an outright assignment or by way of a licence (wherethat IP is still used in other parts of ICI and so ownership is retained byICI). These documents will also deal with certain IP rights which Croda willacquire as part of the transaction but which must be licensed back to ICI,either for the transitional period, or for use in other parts of ICI's business. Facility Agreement The Facility Agreement was entered into on 29 June 2006 between, amongst others,the Company as original borrower and original guarantor and Barclays and theRoyal Bank of Scotland as original lenders and arrangers under which the Companyobtained a £450 million facility. The facility consists of (i) a multicurrency revolving loan facility of £200million (ii) a multicurrency term loan facility of £150 million and (iii) amulticurrency revolving loan facility with a term out option of £100 million(together the "Facility") each for the purposes of financing the Acquisition aswell as general corporate purposes and working capital requirements of the Crodagroup. In addition to the Company entering into the Facility Agreement as originalborrower and original guarantor, all material subsidiaries of the Company mustaccede to the Facility Agreement as guarantors. There is also an aggregate testfor guarantors. The Facility Agreement contains customary representations, warranties andcovenants in favour of the lenders for a facility of this nature. Interestpayable under the Facility is LIBOR plus a margin is capable of changing overtime depending on the gearing ratio set out in the Facility Agreement. Themulticurrency term loan facility is subject to scheduled amortisation. Appendix II - Definitions "Acquisition" the proposed acquisition of Uniqema, a division of ICI "Acquisition Agreement" the agreement between Croda and ICI relating to the Acquisition, dated 29 June 2006 "Barclays" Barclays Bank plc "the Board" the board of directors of Croda "Competition Clearances" Mandatory clearances from the relevant authorities in the US, Germany and South Africa and pending such clearances no referral by any other relevant European competition authority "Completion" completion of the Acquisition in accordance with the terms of the Acquisition Agreement "Croda" or the "Company" Croda International Plc "Croda Shareholders" the holders of the Ordinary Shares of Croda "EBITDA" earnings before interest, tax, depreciation and amortisation "Enlarged Group" Croda, and its subsidiaries and subsidiary undertakings following Completion "EPS" earnings per share "Equity Placing" offer of new shares to institutional shareholders in the UK and certain other investors on a non pre-emptive basis "Extraordinary General the extraordinary general meeting of Croda expected to be convened in August 2006Meeting" or "EGM" "Facility Agreement" the facility agreement to be entered into with Barclays and the Royal Bank of Scotland "ICI" Imperial Chemical Industries Plc "IFRS" international financial reporting standards "London Stock Exchange" London Stock Exchange plc "Merrill Lynch" Merrill Lynch International "New Debt Facilities" the new debt facilities as arranged by Barclays and the Royal Bank of Scotland"Ordinary Shares" and " ordinary shares of 10p each in the capital of CrodaOrdinary Share Capital" "Prospectus" Croda's prospectus to be published in relation to the Acquisition "Royal Bank of Scotland" The Royal Bank of Scotland plc "Shareholder Circular" Croda's shareholder circular to be issued in relation to the Acquisition "Signing" the signing of the Acquisition Agreement "UK Listing Rules" the listing rules of the UK Listing Authority "Uniqema" a division of ICI being the subject of the Acquisition This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Croda International