LONDON—Synthomer P.L.C., a United Kingdom-based manufacturer of elastomers and specialty chemicals, is acquiring Beachwood, Ohio-headquartered Omnova Solutions Inc. for $10.15 per share.
In announcing the acquisition July 3, Synthomer said strong synergy potential, a natural strategic fit and an extended geographic footprint dictated the deal.
"Omnova has been on our radar for several years," Synthomer CEO Calum MacLean said in a webcast announcing the acquisition. "We have been patient in waiting for the right time and price to acquire it."
In a press release, Synthomer valued the purchase of Omnova's outstanding shares at $473 million with an implied enterprise value of about $824 million, based on current exchange rates.
Synthomer also estimated the target run-rate pre-tax cost synergies of $29.6 million annually by the end of the third year after the acquisition is completed. "For our investors, the transaction hits the sweet spot in respect to size and strategic alignment, supported by a conservatively financed approach," MacLean said.
Omnova has about 1,900 employees with 13 manufacturing facilities across North America, Europe and Asia, eight of which are in the U.S., as well as sales representatives in more than 90 countries, according to Synthomer.
Omnova is a manufacturer of polymers, dispersions and elastomers, giving it a strong alignment with Synthomer, MacLean said.
Sixty percent of Omnova's sales are in North America, and the acquisition will give Synthomer a much greater presence in the region, as well as its first manufacturing presence in China, he said.
Synthomer's key activities include aqueous dispersions, both acrylic and vinyl; performance elastomers including NB rubber latex, SB rubber latex and high-solids SB rubber; and industrial specialties, including specialty chemical additives and non-aqueous-based chemistry, according to a Synthomer slide presentation on the acquisition.
These specialties make Omnova a strong strategic fit with Synthomer, the U.K.-based company said.
For example, Omnova has major capabilities in performance additives and the paper and carpet industries, which makes it an excellent source for additives for Synthomer's nitrile gloves, coatings for specialty paper and packaging, and carpet compounds, Synthomer said.
Other advantages the Omnova acquisition brings Synthomer, it said, are:
- Expansion and diversification of its product portfolio;
- Enhanced focus on specialty products, supported by strong research and development;
- Global geographic coverage with increased customer proximity and access to attractive international markets; and
- The ability to leverage manufacturing excellence to drive productivity and cost improvements.
Omnova announced the acquisition in the same release in which it stated its sales and earnings for the second quarter of 2019.
In the release, Omnova said the $10.15-per-share offer was 52 percent above its three-month weighted share price average of $6.67.
"This transaction presents increased opportunities for the business and its employees to leverage the combined scale, grow more quickly and profitably, and enhance product innovation in ways that will benefit customers and employees," Omnova CEO Anne Noonan said.
The sale is not contingent on obtaining financing and is expected to close in late 2019 or early 2020, she said.
Omnova's second-quarter 2019 net sales totaled $205.7 million, compared with $206.3 million for the first three months of 2018, the company said.
Noonan said Omnova had its 10th consecutive quarter of year-over-year volume growth in its Specialty Solutions segment, driven by specialty coatings, adhesives and sealants, and oil and gas.
Net sales in Specialty Solutions were $142.3 million, up 10.5 percent from the $128.8 million posted in the third quarter of 2018.
Sales in Performance Materials fell to $63.4 million from $77.5 million during the quarter, according to Omnova.
"Paper and carpet were the key drivers of the decline, reflecting the company's strategic initiative to reduce dependence on commodity business in structural decline," it said.
Omnova is the third acquisition Synthomer has announced in the past three years.
In March 2016, Synthomer purchased Hexion Inc.'s adhesives and coatings business for $226 million. In September 2017, it acquired BASF's styrene-butadiene rubber business in Pischelsdorf, Austria.
Omnova itself was recently in acquisition mode. In September 2018, it purchased Portuguese resins and binders manufacturer Resiquimica S.A.
Omnova's stock price soared upon news of the acquisition by Synthomer. The price rose 55.4 percent to $9.98 on July 3, just after the announcement, and closed at $10.01 at close of business July 10.