PolyOne Accelerates Specialty Transformation With Agreement to
Acquire Spartech
CLEVELAND and ST. LOUIS, Oct. 24,
2012 /PRNewswire-FirstCall/ --
Acquisition Highlights:
- Spartech expands PolyOne's specialty portfolio with adjacent
technologies in attractive end markets
- Leading North America market
positions in sheet, rigid barrier packaging and specialty cast
acrylic technologies
- Focused areas of growth in aerospace, security, packaging and
healthcare
- Significant opportunity to expand profitability by
leveraging PolyOne's four-pillar strategy
- Bolt-on acquisition with opportunity for global expansion
- Align capacity and cost structure with the voice of the
customer
- Mix shift away from volume toward value
- Cross selling to enhance market penetration
- Preliminary annualized synergies estimated at $65 million
- Expected to be accretive to EPS in first full year
post-acquisition
- Annual EPS expected to expand by $0.50 per share upon full synergy capture
- PolyOne has a proven management team with a track record of
success
- Spartech looks much like PolyOne did in the early years of
transformation
- Substantial share price appreciation potential for all
shareholders
- Spartech stockholders to receive cash and stock valued at
$8.00 per Spartech common
share
PolyOne Corporation (NYSE: POL), a premier provider of
specialized polymer materials, services and solutions, and Spartech
(NYSE: SEH), a leading producer of plastic sheet, compounds and
packaging solutions, today announced they have entered into a
definitive agreement, under which PolyOne will acquire
Spartech. Under the terms of the agreement, Spartech
stockholders will receive $2.67 in
cash and 0.3167 shares of PolyOne common stock for each share of
Spartech common stock. Based on the closing price of PolyOne shares
on Tuesday, October 23, Spartech
stockholders will receive cash and stock valued at $8.00 per Spartech common share, representing a
total transaction value of approximately $393 million, including the assumption of
Spartech's net debt of $142
million.
"I am extremely pleased to announce we've reached an agreement
to acquire Spartech," said Stephen D.
Newlin, chairman, president and chief executive officer,
PolyOne Corporation. "Spartech expands PolyOne's specialty
portfolio with adjacent technologies in attractive end markets
where we already participate as well as new ones like aerospace and
security. By combining Spartech's leading market positions in
sheet, rigid barrier packaging and specialty cast acrylics with
PolyOne's capabilities, we can accelerate growth for both
companies. We believe this is a very compelling transaction
for our shareholders, customers and employees.
"We believe that Spartech's businesses have specialty
characteristics that are reminiscent of PolyOne's Specialty
platform in the early stages of our transformation. Our exceptional
management team has the experience and proven track record of
transforming businesses with specialty potential through execution
of our existing four pillar strategy," added Mr. Newlin.
"We are excited to be joining forces with PolyOne as we believe
this transaction represents the best path forward for our
stockholders, customers and valued employees," said Vicki Holt, president and chief executive
officer, Spartech Corporation. "PolyOne and Spartech have
complementary growth strategies, and by combining our resources we
expect to accelerate our shift to specialty applications with a
more competitive cost structure, enhanced customer relationships,
improved market access and increasingly innovative
technologies. Furthermore, this transaction provides
Spartech's stockholders with immediate value through a combination
of a meaningful upfront premium, participation in the continued
upside of our combined businesses, and in the synergies inherent in
this transaction. I want to thank our employees for their
tireless commitment to our customers, and the execution of our
strategies to grow earnings. We look forward to working
closely with PolyOne to close this transaction as expeditiously as
possible."
Spartech is a leading producer of plastic products including
polymeric compounds, concentrates, custom extruded sheet and
rollstock products and packaging technologies for a wide spectrum
of customers. Spartech's three business segments operate 30
facilities in the United States,
Mexico, Canada and France. Spartech achieved sales and adjusted
EBITDA of approximately $1.2 billion
and $53.1 million, respectively, for
the trailing twelve months ended August 4,
2012.
"We believe this acquisition offers significant operational and
commercial synergy opportunities beyond just the elimination of
duplicate public company costs. We see opportunities to align
operations and supply chain with the voice of the customer, shift
mix away from volume and toward value, expand cross-selling
capabilities and globalize Spartech's business platforms," said Mr.
Newlin. "In particular, we are very excited to leverage Spartech's
capabilities in applications where Spartech has complementary
offerings."
On a preliminary basis, PolyOne has identified annual synergies
of approximately $65 million to be
phased in by the third year following acquisition. Excluding
acquisition-related costs and charges, PolyOne expects the
transaction to be accretive to earnings in the first full year and
ultimately add $0.50 to EPS, as the
$65 million of synergies are
achieved.
Mr. Newlin added, "We look forward to completing the transaction
and joining our companies together in order to deliver even
stronger returns to PolyOne shareholders."
In aggregate, PolyOne will issue approximately 10 million shares
of PolyOne stock and pay approximately $84
million in cash to Spartech shareholders. PolyOne intends to
finance the cash portion of the purchase price through a
combination of cash on hand and new long-term debt financing.
In connection with the transaction, PolyOne's Board of Directors
increased the company's share repurchase authorization to a total
of 20 million shares contingent upon consummation of the Spartech
acquisition. Subject to market and other conditions, and in
addition to previously planned purchases to offset dilution,
PolyOne intends to opportunistically buy back shares issued in
connection with this transaction, and complete these repurchases
within 12 to 18 months following the close of the
acquisition. Assuming this share repurchase is fully
executed, this will essentially result in a total financial impact
to the company as if the acquisition of Spartech were structured
with 100% cash. PolyOne's management and Board of Directors
remain committed to maintaining a strong credit profile and
providing returns to shareholders in the form of cash
dividends.
For Spartech investors, the proposed transaction represents a
premium of 56 percent to the value of its stock on October 23, 2012, the last trading day prior to
the announcement of the transaction.
The transaction, which was unanimously approved by the Boards of
Directors of both companies, remains subject to approval by
Spartech's shareholders and receipt of required regulatory
approvals as well as other customary closing conditions. The
transaction is expected to close in the first quarter of 2013.
Bank of America Merrill Lynch, Moelis & Company and KeyBanc
Capital Markets acted as financial advisors to PolyOne on this
transaction, and Jones Day is acting
as legal counsel. Spartech's financial and legal advisors for this
transaction are Barclays and K&L Gates, respectively.
PolyOne will host a conference call in which both third quarter
earnings and the Spartech acquisition will be discussed on
October 24, 2012 at 9:00 a.m. EST. The call can be accessed by
dialing 866-356-3377 (International: 617-597-5392) and entering
Passcode 27155297. To listen to the live webcast of the
conference call and view the accompanying slides, go to
www.polyone.com/investor.
Spartech will host a conference call with investors and
financial analysts in which the transaction will be discussed on
October 24, 2012 at 10:30 a.m. EST. Investors can listen to the call
live via webcast by logging onto www.spartech.com, or via phone by
dialing (877) 724-7545 and providing the Conference ID#: 57101460.
International callers may dial (832) 900-4628.
About Spartech
With annual revenues of approximately
$1.2 billion, Spartech is a leading
producer of plastic products including polymeric compounds,
concentrates, custom extruded sheet and rollstock products and
packaging solutions for a wide spectrum of customers. Spartech's
three business segments, which operate in the United States, Mexico, Canada, and France, annually process approximately one
billion pounds of plastic resins, specialty plastic alloys, and
color and specialty compounds. Additional information can be found
at www.spartech.com.
About PolyOne
PolyOne Corporation, with 2011 revenues
of $2.9 billion, is a premier
provider of specialized polymer materials, services and solutions.
The company is dedicated to serving customers in diverse industries
around the globe, by creating value through collaboration,
innovation and an unwavering commitment to excellence. Guided
by its Core Values, Sustainability Promise and No Surprises
PledgeSM, PolyOne is committed to its customers,
employees, communities and stockholders through ethical,
sustainable and fiscally responsible principles. For more
information, visit www.polyone.com.
To access PolyOne's news library online, please visit
www.polyone.com/news
For PolyOne:
Investor Contact
Cynthia D.
Tomasch
Vice President, Planning & Investor Relations
PolyOne Corporation
+1 440-930-3155
cynthia.tomasch@polyone.com
Media Contact
Kyle G.
Rose
Director, Corporate Communications
PolyOne Corporation
+1 440-930-3162
kyle.rose@polyone.com
For Spartech:
Investor Contact
Randy C.
Martin
Executive Vice President and Chief Financial Officer
(314) 721-4242
Media Contact
Christi
Emmenegger
Corporate Marketing Communications Manager
(314) 721-4242
Cautionary Note on Forward-Looking Statements
This document contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. In
particular, statements in this document regarding the proposed
acquisition of Spartech Corporation are forward-looking statements.
Forward-looking statements give current expectations or forecasts
of future events and are not guarantees of future
performance. They are based on management's expectations that
involve a number of business risks and uncertainties, any of which
could cause actual results to differ materially from those
expressed in or implied by the forward-looking statements.
They use words such as "will," "anticipate," "estimate," "expect,"
"project," "intend," "plan," "believe," and other words and terms
of similar meaning in connection with any discussion of future
operating or financial condition, performance and/or sales.
Factors that could cause actual results to differ materially from
those implied by these forward-looking statements include, but are
not limited to: the time and costs required to consummate the
proposed acquisition; the satisfaction or waiver of conditions in
the merger agreement; any material adverse changes in the business
of Spartech; the ability to obtain required regulatory, stockholder
or other third-party approvals and consents and otherwise
consummate the proposed acquisition; our ability to achieve the
strategic and other objectives relating to the proposed
acquisition, including any expected synergies; our ability to
successfully integrate Spartech and achieve the expected results of
the acquisition, including, without limitation, the acquisition
being accretive; disruptions, uncertainty or volatility in the
credit markets that could adversely impact the availability of
credit already arranged and the availability and cost of credit in
the future; the financial condition of our customers, including the
ability of customers (especially those that may be highly leveraged
and those with inadequate liquidity) to maintain their credit
availability; the speed and extent of an economic recovery,
including the recovery of the housing market; our ability to
achieve new business gains; the effect on foreign operations of
currency fluctuations, tariffs, and other political, economic and
regulatory risks; changes in polymer consumption growth rates where
we conduct business; changes in global industry capacity or in the
rate at which anticipated changes in industry capacity come online;
fluctuations in raw material prices, quality and supply and in
energy prices and supply; production outages or material costs
associated with scheduled or unscheduled maintenance programs;
unanticipated developments that could occur with respect to
contingencies such as litigation and environmental matters; an
inability to achieve or delays in achieving or achievement of less
than the anticipated financial benefit from initiatives related to
working capital reductions, cost reductions, and employee
productivity goals; an inability to raise or sustain prices for
products or services; an inability to maintain appropriate
relations with unions and employees; the inability to achieve
expected results from our acquisition activities; our ability to
continue to pay cash dividends; the amount and timing of
repurchases of our common shares, if any; and other factors
affecting our business beyond our control, including, without
limitation, changes in the general economy, changes in interest
rates and changes in the rate of inflation. The above list of
factors is not exhaustive.
We undertake no obligation to publicly update forward-looking
statements, whether as a result of new information, future events
or otherwise. You are advised to consult any further
disclosures we make on related subjects in our reports on Form
10-Q, 8-K and 10-K that we provide to the Securities and Exchange
Commission.
Additional Information
In connection with the proposed transaction, a registration
statement on Form S-4 will be filed with the SEC. SPARTECH
CORPORATION STOCKHOLDERS ARE ENCOURAGED TO READ THE REGISTRATION
STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC,
INCLUDING THE PROXY STATEMENT/PROSPECTUS THAT WILL BE PART OF THE
REGISTRATION STATEMENT, WHEN THEY BECOME AVAILABLE, BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. The
final proxy statement/prospectus will be mailed to stockholders of
Spartech Corporation. Investors and security holders will be able
to obtain the documents free of charge at the SEC's website,
www.sec.gov, from PolyOne at its website,
www.polyone.com, or 33587 Walker Road, Avon Lake, Ohio 44012, Attention: Corporate
Secretary, or from Spartech Corporation at its website,
www.spartech.com, or 120 S. Central Avenue, Suite 1700,
Clayton, MO 63105, Attention:
Corporate Secretary.
Participants in Solicitation
PolyOne and Spartech Corporation and their respective directors
and executive officers may be deemed to be participants in the
solicitation of proxies in respect of the proposed merger.
Information concerning PolyOne's participants is set forth in the
proxy statement, dated March 23,
2012, for PolyOne's 2012 Annual Meeting of Stockholders as
filed with the SEC on Schedule 14A and PolyOne's current reports on
Form 8-K, as filed with the SEC on May 11,
2012 and September 25, 2012.
Information concerning Spartech Corporation's participants is set
forth in the proxy statement, dated January
24, 2012, for Spartech Corporation's 2012 Annual Meeting of
Stockholders as filed with the SEC on Schedule 14A and Spartech
Corporation's current report on Form 8-K, as filed with the SEC on
March 16, 2012. Additional
information regarding the interests of participants of PolyOne and
Spartech Corporation in the solicitation of proxies in respect of
the proposed merger will be included in the registration statement
and proxy statement/prospectus and other relevant materials to be
filed with the SEC when they become available. This
communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation, or sale would be unlawful prior to registration or
qualification under the securities laws of any such
jurisdiction.
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
|
(Dollars
in millions, except per share data)
|
|
Below is a
reconciliation of non-GAAP financial measures to the most directly
comparable measures calculated and presented in accordance with
U.S. GAAP.
|
|
|
|
|
Calculation of Spartech LTM sales and operating
income adjusted as a percent of sales
|
4Q11
|
Q3
YTD
|
Q3
LTM
|
|
|
|
|
Sales
|
$
293.2
|
$
862.6
|
$
1,155.8
|
|
|
|
|
Spartech LTM EBITDA – excluding special
items
|
Q4
2011
|
Q3
YTD
|
Q3
LTM
|
Net (loss)
income – GAAP
|
$
(27.4)
|
$
3.2
|
$
(24.2)
|
Goodwill
impairments, net of tax
|
28.4
|
-
|
28.4
|
Restructuring and exit costs, net of tax
|
0.4
|
0.6
|
1.1
|
Net income
– excluding special items
|
$
1.4
|
$
3.9
|
$
5.3
|
Interest
expense, net
|
2.9
|
9.1
|
12.1
|
Depreciation and amortization
|
9.0
|
23.8
|
32.9
|
Income tax
expense
|
1.8
|
1.0
|
2.8
|
LTM EBITDA
– excluding special items
|
$
15.2
|
$
37.9
|
$
53.1
|
SOURCE PolyOne Corporation