Cytec Completes Acquisition of
UCB's Surface Specialties Business
Tuesday March 1, 8:59 am ET
Announces Redesigned Organizational Structure
WEST PATERSON, N.J.--(BUSINESS WIRE)--March 1, 2005--Cytec Industries Inc. announced today that it has completed its previously announced acquisition of UCB's Surface Specialties business. The transaction is valued at $1.797 billion of which EUR 1.140 billion ($1.505 billion at 1.32$/EUR) was paid in cash and the balance was paid in 5,772,857 shares of Cytec common stock ($292 million at $50.55 per Cytec share). In addition, there is contingent consideration up to a maximum of EUR 50 million, of which EUR 20 million was paid up front with the balance payable in 2006. The contingent consideration is earned on a pro rata basis pending the achievement of certain operating results by Surface Specialties in 2005.
UCB now owns approximately 12.5% of the outstanding shares of Cytec, and has entered into a stockholders agreement which provides for UCB to reduce its stake within 5 years, and contains other customary terms and conditions. The cash portion of the acquisition cost was financed utilizing the credit facilities recently announced by the Company.
In conjunction with this transaction, Cytec has agreed to divest Surface Specialties' amino resin product line during 2005, and to use the proceeds to reduce debt. Sales of Surface Specialties' amino resin product line in 2004 were approximately EUR 123 million.
David Lilley, Chairman, President and Chief Executive Officer commented, "With this acquisition, Cytec becomes one of the world's leading suppliers of specialty chemicals to the coatings industry, and creates a combined Cytec entity of approximately $3.0 billion based on 2004 pro forma revenues excluding Surface Specialties' amino resin produce line. This transaction complements Cytec's existing product lines by significantly increasing Cytec's product offering to the coatings industry, including the general industrial, automotive, architectural, plastics, graphic arts, and wood end-markets. This acquisition provides us with a sustainable growth platform with potentially above-average growth rates, and expands our technology base and our geographic capabilities."
James P. Cronin, Executive Vice President and Chief Financial Officer commented, "Cytec expects this acquisition to be immediately accretive to cash flow and earnings per share excluding transaction costs, integration costs, non-cash purchase accounting adjustments and gains/losses resulting from our currency and interest rate hedging program related to the acquisition. The new and expanded Cytec is expected to continue to have strong cash flow that will be used to support growth opportunities for our businesses, pay down debt, and maintain our dividend. We expect to suspend our stock buyback program for at least two years. We also now expect to achieve annual synergies of approximately $25 million from savings in administration costs and other consolidation opportunities no later than twelve months from now."
Mr. Lilley also announced a redesigned organizational structure, "Cytec will operate the acquired Surface Specialties business as a separate segment, and will integrate the existing Coating and Performance Chemicals product lines into this new segment, which will be headquartered in Brussels, Belgium. Mr. Ben Van Assche, formerly Director-General of Surface Specialties, has been named President of Cytec Surface Specialties and will be elected an officer of Cytec and a member of our Executive Committee. The remaining two product lines in Cytec's Performance Products segment, Polymer Additives and Specialty Additives, will be combined with the Water and Industrial Process segment. This specialty chemicals segment, which includes the Water Treatment, Mining, and Phosphine Chemicals product lines and now the Polymer Additives and Specialty Additives product lines, will be renamed Cytec Performance Specialties, and will continue to be headquartered at Cytec's corporate headquarters in West Paterson, New Jersey. Mr. Shane Fleming, President, Cytec Performance Specialties and his strong management team will continue their focus on delivering earnings growth through value-added products, geographic expansion, and operational excellence.
"In addition, Cytec's Specialty Materials segment has been renamed Cytec Engineered Materials and will continue to be led by Mr. Steven Speak, President, Cytec Engineered Materials and maintain its headquarters in Tempe, Arizona. Cytec's other segment, Building Block Chemicals, is unchanged and will continue to be headquartered at Fortier, Louisiana with Mr. Jas Gill continuing as President, Cytec Building Block Chemicals."
Mr. Lilley concluded, "Similar to Cytec, Surface Specialties has very capable and talented employees with a clear emphasis on providing customers with value-added services, and we enthusiastically welcome them to Cytec. We are excited about the possibilities for further enhancing shareholder returns going forward."
As recently communicated by UCB, preliminary results in 2004 for the business to be acquired had sales and EBITDA (earnings before interest, taxes, depreciation and amortization), prepared in accordance with accounting principles generally accepted in Belgium, of EUR 1.112 billion ($1.468 billion at 1.32$/EUR) and EUR 147 million ($194 million at 1.32$/EUR), respectively. Sales and EBITDA for Surface Specialties for the year ended 2003 were EUR 1.0 billion and EUR 125 million, respectively. The indicated EBITDA excludes certain corporate expenses to be retained by UCB and certain items of a non-recurring nature. Cytec expects to provide additional details on Surface Specialties' financial results for 2004 as well as 2005 earnings estimates for the combined company during its first quarter earnings conference call in early May of this year.
Forward-Looking and Cautionary Statements
Except for the historical information and discussions contained herein, statements contained in this release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Achieving the results described in these statements involves a number of risks, uncertainties and other factors that could cause actual results to differ materially, as discussed in Cytec's filings with the Securities and Exchange Commission.
Cytec Industries is a specialty chemicals and materials technology company with pro forma sales in 2004, including the Surface Specialties acquisition, of approximately $3.0 billion. Its growth strategies are based on developing technologically advanced customer solutions for global markets including: aerospace, coatings, mining, plastics and water treatment.
Cytec Industries Inc.
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