OMNOVA Solutions Completes Acquisition of ELIOKEM From AXA Private Equity

FAIRLAWN, Ohio, Dec. 9, 2010 /PRNewswire/ --

• The acquisition creates larger, more diverse global specialty chemical and functional surfaces company with sales over US$1 billion and Adjusted EBITDA of approximately US$129 million, based on last twelve months through August 2010.

• Significantly expands Performance Chemicals segment's global capabilities with particular emphasis on the high growth, developing markets in Asia.

• Diversifies Performance Chemicals segment's opportunities for growth by adding new, but related products, markets and technologies, and broadening its applications capability.

• Expected to be accretive to earnings in 2012.

OMNOVA Solutions (NYSE: OMN) today announced that it has completed its acquisition of specialty chemicals manufacturer Eliokem International ("ELIOKEM") from AXA Private Equity.  OMNOVA paid 227.5 million euros for ELIOKEM, or approximately US$302 million at current exchange rates, before subtracting ELIOKEM's net debt and subject to working capital and capital expenditure adjustments.  The Company expects the transaction to be neutral to slightly dilutive to earnings in 2011, but accretive in 2012.

In connection with the acquisition, the Company issued US$250 million in senior notes due 2018, replaced its existing US$150 million term loan with a new US$200 million term loan, and amended and extended its existing revolving credit facility.  

"This combination creates a significantly enhanced, more diversified Performance Chemicals business that is well positioned to serve customers on a global basis," said Kevin McMullen, Chairman and Chief Executive Officer of OMNOVA Solutions.  "It contributes to all three of our Company's strategic objectives by providing entry into several new higher growth markets, expanding our portfolio of value-added technology solutions and significantly broadening our global manufacturing footprint.  Additionally, synergies are expected to provide savings in manufacturing, logistics, purchasing and SG&A by leveraging the resources of an integrated global team.

"Together, with our Decorative Products functional surfaces business, OMNOVA Solutions will be a US$1.1 billion company, based on last twelve months sales through August," McMullen said.  "Over 40% of those sales will be outside the United States."  

While 75% of ELIOKEM's sales are in product markets that OMNOVA has not previously served, ELIOKEM's business model – including manufacturing process, key raw materials and go-to-market approach – is very similar to OMNOVA's.  Focusing on the same basic emulsion polymerization process, the acquisition adds a number of new acrylic, styrene butadiene and nitrile chemistries and applications, including coating resins, elastomeric modifiers, antioxidants, specialty rubbers and reinforcing resins, as well as complementary products for oil field and specialty latex applications.

OMNOVA Solutions' Performance Chemicals business has been primarily a producer of styrene butadiene, acrylic and other latices and specialty chemicals used in coatings for high-end paper and packaging, carpet, durable and consumable nonwovens, tape and release coatings, floor polishes, construction, oil field, textile finishes, digital printing, graphic arts and other specialty applications.

Both chemical businesses have achieved solid growth in 2010, with combined last twelve months sales and Adjusted EBITDA through August of approximately US$788 million and US$122 million, respectively.

In addition to OMNOVA's five chemical production facilities in North America which provide products and services worldwide, the acquisition adds global manufacturing capability to serve Europe and the high growth, developing markets in Asia with one plant in France (Le Havre), two plants in China (Ningbo and Caojing) and one in India (Valia).  In addition, the ELIOKEM plant in Akron, Ohio, will provide OMNOVA with important new processing capabilities.  

Both OMNOVA and ELIOKEM have strong polymer development capabilities and a talented team of scientists and technical service specialists which, in combination, will accelerate development of a broader range of solutions for new and existing customers.  The combined Company will have R&D capabilities on three continents.

"Our Performance Chemicals business will remain headquartered in Fairlawn, Ohio, with global manufacturing and product line management structured regionally around (1) North America, (2) Europe, India and the Middle East, and (3) Asia," said Jim Hohman, President of OMNOVA's Performance Chemicals segment.  "This structure will assure an aligned business strategy focused on providing value-added solutions to our customers on a global basis and achieving profitable sales growth."

Non-GAAP Financial Measures – This press release includes EBITDA and Adjusted EBITDA which are Non-GAAP financial measures as defined by the Securities and Exchange Commission.

OMNOVA's EBITDA is calculated as income (loss) from continuing operations less interest expense, amortization of deferred financing costs, income taxes and depreciation and amortization expense.  OMNOVA's Adjusted EBITDA is calculated as OMNOVA's EBITDA less restructuring and severance expenses, asset impairments, non-cash stock compensation and other items.  Segment EBITDA is calculated as segment operating income (loss) less interest expense, amortization of deferred financing costs, income taxes and depreciation and amortization expense.  Segment Adjusted EBITDA is calculated as Segment EBITDA less restructuring and severance expenses, asset impairments, non-cash stock compensation and other items.

ELIOKEM's EBITDA is calculated as net income less interest expense, amortization of deferred financing costs, income taxes and depreciation and amortization expense.  ELIOKEM's Adjusted EBITDA is calculated as ELIOKEM's EBITDA less restructuring and severance expenses, and other items.  

EBITDA and Adjusted EBITDA are not measures of financial performance under GAAP.  EBITDA and Adjusted EBITDA are not calculated in the same manner by all companies and, accordingly, are not necessarily comparable to similarly titled measures of other companies and may not be appropriate measures for comparing performance relative to other companies.  EBITDA and Adjusted EBITDA should not be construed as indicators of the Company's operating performance or liquidity and should not be considered in isolation from or as a substitute for net income (loss), cash flows from operations or cash flow data, which are all prepared in accordance with GAAP.  EBITDA and Adjusted EBITDA are not intended to represent, and should not be considered more meaningful than or as an alternative to, measures of operating performance as determined in accordance with GAAP.  Management believes that presenting this information is useful to investors because these measures are commonly used as analytical indicators to evaluate performance and by management to allocate resources.  Set forth below are the reconciliations of these non-GAAP measures to their most directly comparable GAAP financial measure.

Forward-looking Statements – This press release includes "forward-looking statements" as defined by federal securities laws.  These statements, as well as any verbal statements by the Company in connection with this press release, are intended to qualify for the protections afforded forward-looking statements under the Private Securities Litigation Reform Act of 1995.  Forward-looking statements reflect management's current expectation, judgment, belief, assumption, estimate or forecast about future events, circumstances or results and may address business conditions and prospects, strategy, capital structure, sales, profits, earnings, markets, products, technology, operations, customers, raw materials, financial condition, and accounting policies, among other matters.  Words such as, but not limited to, "will," "may," "should," "projects," "forecasts," "seeks," "believes," "expects," "anticipates," "estimates," "intends," "plans," "targets," "optimistic," "likely," "would," "could," and similar expressions or phrases identify forward-looking statements.  

All forward-looking statements involve risks and uncertainties.  Many risks and uncertainties are inherent in business generally and the markets in which the Company operates or proposes to operate.  Other risks and uncertainties are more specific to the Company's businesses, including businesses the Company acquires.  The occurrence of such risks and uncertainties and the impact of such occurrences is often not predictable or within the Company's control.  Any such occurrence could adversely affect the Company's results and, in some cases, such effect could be material.

All written and verbal forward-looking statements attributable to the Company or any person acting on the Company's behalf are expressly qualified in their entirety by the risk factors and cautionary statements contained herein.  Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation, and specifically declines any obligation other than that imposed by law, to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Risk factors and uncertainties that may cause actual results to differ materially from expected results include, among others: the ability of the Company to successfully integrate ELIOKEM into its operations; the impact of ELIOKEM's results of operations on the Company's ability to achieve fully the strategic and financial objectives related to the acquisition of ELIOKEM, including the acquisition being accretive to the Company's earnings; and unexpected costs or liabilities that may arise from the acquisition of ELIOKEM.

Additional risk factors include: economic trends affecting the economy in general and/or the Company's end-use markets; prices and availability of raw materials including styrene, butadiene, vinyl acetate monomer, polyvinyl chloride, acrylics and textiles; ability to increase pricing to offset raw material cost increases; product substitution and/or demand destruction due to product technology, performance or cost disadvantages; loss of a significant customer; customer and/or competitor consolidation; customer bankruptcy; ability to successfully develop and commercialize new products; a decrease in demand for domestically manufactured products due to increased foreign competition and off-shoring of production; ability to successfully implement productivity enhancement and cost reduction initiatives; unexpected full or partial suspension of plant operations; the Company's strategic alliance, joint venture and acquisition activities; loss or damage due to acts of war or terrorism, natural disasters, accidents, including fires, floods, explosions and releases of hazardous substances; governmental legislative and regulatory changes, including changes impacting environmental compliance, pension plans, products and raw materials; compliance with extensive environmental, health and safety laws and regulations; rapid inflation in health care costs and assumptions used in determining health care cost estimates; risks associated with foreign operations including political unrest and fluctuations in exchange rates of foreign currencies; prolonged work stoppage resulting from labor disputes with unionized workforce; meeting required pension plan funding obligations; stock price volatility; infringement or loss of the Company's intellectual property; litigation and claims against the Company related to products, services, contracts, employment, environmental, safety, intellectual property and other matters arising out of the Company's business and adverse litigation judgments or settlements; absence of or inadequacy of insurance coverage for litigation, judgments, settlements or other losses; availability of financing at anticipated rates and terms; and loan covenant default arising from substantial debt and leverage and the inability to service that debt, including increases in applicable short-term or long-term borrowing rates.      

OMNOVA Solutions Inc. is a technology-based company with – excluding the ELIOKEM acquisition – last twelve months sales through August 2010 of US$827 million and a workforce of approximately 2,300 employees worldwide.  The acquisition will add approximately 600 ELIOKEM employees.  OMNOVA, which has served the styrene butadiene latex industry since the 1950s, is an innovator of emulsion polymers, specialty chemicals, and decorative and functional surfaces for a variety of commercial, industrial and residential end-uses.  Visit OMNOVA Solutions on the internet at www.omnova.com.

SOURCE OMNOVA Solutions Inc.