HESSLE, England—Michelin has made an offer to acquire conveyor belt and polymer goods maker Fenner P.L.C. in a cash deal worth about $1.7 billion.
Michelin has offered $8.56 per share for all of Fenner, which is a 30.7 percent premium to Hessle-based Fenner's share price at the close of business March 16, according to a Michelin release. The acquisition is to be implemented by means of a court-sanctioned scheme of arrangement.
Fenner, a producer of conveyor belt solutions and reinforced polymer products, posted revenues of more than $900 million for its most recent fiscal year, ended Aug. 31, 2017. It posted a an EBITDA margin of 13 percent for the year.
After analysis and discussions with Fenner, Michelin identified opportunities to achieve material cost savings, of which $42.1 million immediate annual synergies, unlock processing efficiencies and leverage research and development skills, said Michelin.
Those synergies are expected to reach full effect within two years, with limited implementation cost, according to a Michelin presentation. Those include efficiencies in procurement with Fenner benefiting from Michelin's purchasing expertise, industrial processing, cross-fertilization between Fenner and Michelin on processes, leverage in customer service organization, and Fenner's access to Latin America and Asia.
The offer is an all-cash acquisition with full committed financing, and has received unanimous recommendation by Fenner's board of directors.
The acquisition is subject to customary closing conditions and regulatory approval, and a Fenner shareholder meeting to be convened in May 2018, according to the presentation. The scheme of arrangement document will be posted there to Fenner shareholders.
A court sanctions hearing validating the scheme and expected closing are anticipated for the end of the second quarter of 2018, according to the presentation.
Fenner provides conveyor belt solutions and reinforced polymer products for the mining and general industrial markets. It operates two divisions: Engineered Conveyor Solutions and Advanced Engineered Products. ECS is a producer of heavy conveyor belts, and AEP is a producer of diversified polymer-engineered products.
The acquisition is in strategic alignment with Michelin's ambition to leverage expertise in high-technology materials, according to a Michelin release.
The transaction will allow the group to provide mining industry customers with a comprehensive offering ranging from tires to conveyor belts with related services and solutions, and to enhance both companies' geographic reach, said Michelin.
It also will help Michelin break into the reinforced polymer markets, notably in consumer goods, industrial services and medical segments, the company said. Michelin is further developing its expertise in advanced materials and engineered products, with Fenner as the cornerstone of the process.
Mastering high-technology materials is key to creating value in the coming years, and Fenner will enable Michelin to accelerate its growth in that area and strengthen its position in the recovering mining markets, Michelin CEO Jean-Dominique Senard said in a statement.
"We find the cultural fit and business opportunities excellent with Michelin," said Fenner CEO Mark Abrahams.
Between ECS and AEP, Fenner has 37 facilities globally, with 4,330 employees as of August 2017, according to the presentation.