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Orion to repay shareholders with proceeds of IPO

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FRANKFURT, Germany—Orion Engineered Carbons S.a.r.l. priced its initial public offering of 19.5 million common shares to the public at $18 per share.

Shares began trading on the New York Stock Exchange on July 25 under the symbol OEC and closed on July 30. The firm has entered a mandatory quiet period for 40 days, beginning July 25.

The common shares were offered by Kinove Luxembourg Holdings 1 S.a.r.l., the majority shareholder in the company. Rhone Capital L.L.C. and Triton Advisors Ltd. are the biggest principal investors, combining to own more than 50 percent of Orion, said Charles Herlinger, the firm's chief financial officer.

Kinove as a whole owns 57.3 percent of Orion, public shareholders account for about 32.7 percent with management owning about 10 percent, he said.

“We think this is a natural progression for this business in many ways,” Herlinger said. “It's been a significant period of investments, three years now, of upgrading our plants, and we now think that the U.S. public market offers us an opportunity to continue to grow the business.”

Orion said it will not receive any proceeds from the sale of common shares in this offering, as outlined in its F-1 initial filing with the U.S. Security and Exchange Commission. The firm outlined in that filing that the proceeds from the IPO will go to repaying a shareholder loan in full.

Herlinger said the loan amounted to about 200 million Euros, which is about $267.6 million converted using current exchange rates. The IPO will allow Orion to refinance its debt down from more than 10 percent to about 4-5 percent.

“This isn't your classic private equity investor sellout,” Herlinger said. “This set this company up in the public market with a three times leveraged EBITA, the right level of equity and set us up to continue to move this business forward.”

Orion changed its legal form to a Luxembourg joint stock corporation and its name to Orion Engineered Carbons S.A. prior to the completion of the offering.

“We've always been owned by a Luxembourg company,” Herlinger said. “We felt that was the logical entity that would become the listing entity. There is no great tax play here. It works from a point of view of paying dividends. We had to make sure whatever structure we chose was efficient from a dividend point of view.”

In its F-1 filing, Orion said it is seeking to acquire Qingdao Evonik Chemicals Co. Ltd., which accounted for about 65,000 metric tons in sales volume for 2013. The company is a joint venture in which Evonik Industries A.G. has a majority interest.

The acquisition is subject to ongoing Chinese government review, negotiations with Evonik, and between Evonik and its joint venture partner, Orion said in its initial F-1 filing. If completed, Orion said the acquisition would improve its ability to serve the Chinese market better than its current use of global network for exports into China.

Orion Engineered Carbons is a worldwide supplier of carbon black, offering standard and high performance products for coatings, printing inks, polymers, rubber and other applications. The firm employs 1,360 worldwide.

Orion operates 14 global production sites and four applied technology centers.