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OMNOVA Solutions Announces Intention to Acquire Eliokem International from AXA Private Equity



Published September 22, 2010
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OMNOVA Solutions Inc. announced that it has entered into an agreement with AXA Private Equity granting the company a period of exclusivity to acquire specialty chemicals manufacturer Eliokem International.

Closing of the proposed transaction is subject to consultation with Eliokem's Works Council in France, completion of a definitive agreement, regulatory approvals, financing and other customary conditions. Subject to these conditions, the company anticipates completion of the transaction by the end of 2010.

Under the proposed transaction, OMNOVA will pay €227.5 million for Eliokem, or approximately $300 million at current exchange rates. OMNOVA intends to raise $425 million of new long term debt to fund the transaction and the repayment of all existing OMNOVA and Eliokem debt.

"This acquisition will transform OMNOVA Solutions into a much larger, more diverse specialty chemical and functional surfaces company with significantly enhanced global capability," said Kevin McMullen, chairman and CEO of OMNOVA Solutions. "It is an excellent fit with OMNOVA's strategy to grow in existing markets, penetrate new adjacent markets and globalize our company."

Eliokem is a worldwide producer of specialty polymers and chemicals, including coating resins, elastomeric modifiers, antioxidants, rubber reinforcing resins, oil and gas drilling chemicals, and latices for specialty applications. Last 12 months sales and adjusted EBITDA through May 2010 were approximately $268 million and $50 million, respectively. Eliokem is headquartered in Villejust, France (near Paris), and has manufacturing sites in Caojing and Ningbo, China; Valia (Gujarat state), India; Le Havre, France; and Akron, OH. Eliokem also has regional sales offices in Akron, Singapore, Shanghai, and Mumbai. The company employs about 630 people worldwide.

OMNOVA plans to integrate Eliokem with its Performance Chemicals segment, a business that has significantly strengthened its competitive position and financial performance over the past several years.

Upon completion, the Eliokem acquisition will provide OMNOVA with significant strategic benefits:

• Globalization: Eliokem's presence in Asia, with over 40% of its sales in higher growth emerging markets, and with two manufacturing sites in China and one in India, will accelerate OMNOVA's strategy of growing its specialty chemicals platform in this region. Asian sales for OMNOVA's Performance Chemicals segment for the last twelve months through May 2010 were approximately $15 million. OMNOVA's chemical sales in Europe for the same period were approximately $30 million, primarily through alliance manufacturing partners. Eliokem's manufacturing site in Le Havre, France is well suited to enable improved growth of high margin specialty chemicals.

• New Adjacent, Related Markets: Like OMNOVA, Eliokem is focused on working very closely with its customers to provide application- and customer-specific value added solutions. Both companies have strong capabilities in polymer development and manufacturing. While OMNOVA's primary focus has been on styrene butadiene (SB) based latices, Eliokem's business will add additional complementary technologies and applications to OMNOVA's specialty chemicals portfolio.

• Cost Savings: Synergies are expected to provide savings in manufacturing, logistics, purchasing and SG&A by leveraging the resources of an integrated global team.

• Higher Growth: The acquisition will provide OMNOVA with a significant position in higher growth market segments and applications, and improved access to the fastest growing regions of the world through well-invested assets.

OMNOVA's Performance Chemicals business segment has led strong earnings growth for the company, contributing solid double-digit operating profit returns over the last eight quarters.

"Thanks to excellent work by our business and technical support teams in Europe and Asia, OMNOVA's chemicals business has continued to grow globally despite the fact that we have had no Company-owned chemical manufacturing assets outside the U.S.," Mr. McMullen said. "The acquisition of Eliokem will allow us to build on this momentum quickly and significantly, and demonstrates our clear commitment to meet the needs of our customers on a worldwide basis."

Consistent with OMNOVA's strategic emphasis on technical leadership and innovation, the combined assets of OMNOVA and Eliokem will provide regional research laboratories in North America, Europe, India and China. New chemistries will enhance OMNOVA's strong portfolio, enabling an even broader range of customer solutions.

"The Eliokem product lines will deepen our technology portfolios in markets we currently serve, such as oil field and specialty latices, and will provide exciting growth opportunities in new, but related markets with brands that are already well known and respected," said Jim Hohman, President of OMNOVA's Performance Chemicals business segment."

OMNOVA's Performance Chemicals segment has continued to grow in 2010. For the last twelve months ended May 2010, sales were $466 million, and adjusted EBITDA increased by 33%, to $71 million. The combination of OMNOVA and Eliokem will create a chemicals business approaching $750 million in annual sales, based on results from the last 12 months through May 2010. Upon completion of the transaction, and including OMNOVA's Decorative Products business segment, OMNOVA Solutions will become a company with more than $1 billion in sales – approximately 40% of which will be outside the U.S. – and adjusted EBITDA of approximately $129 million (based on last 12 months through May 2010 results).


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