Cytec to Buy Umeco for $439 Million


Cytec Industries have today announced its firm intention to acquire all of the outstanding shares of Umeco plc, in an all-cash transaction valued at approximately $439 million (£274.3 million based on a 1.60 exchange rate). The board of directors of Umeco intends to unanimously recommend the transaction to Umeco shareholders. The acquisition of Umeco will allow Cytec to further enhance and leverage its position as a technology leader in advanced composite materials. The transaction will expand Cytec’s presence in both aerospace and industrial applications, an area where Cytec sees excellent opportunities for growth and value creation.

We are excited about combining Umeco with Cytec’s existing advanced composites businesses. It greatly improves our composite presence in the industrial sector, where we see tremendous potential for significant value creation in applications like automotive as customers seek to reduce weight and CO2 emissions. In addition, the acquisition also enhances our near-term composite capacity while we complete capital investments over the next few years, this transaction is consistent with our strategy to focus on profitable and growing segments where we can leverage our technological leadership. The acquisition of Umeco will provide us with additional scale, a dedicated supply chain well-tailored to the needs of the high performance industrial sector and application development capabilities that will help us respond quickly and effectively to customers’ needs.

Founded in 1917, Umeco plc is an international supplier of advanced composite materials, primarily to the aerospace and defense industries, and industrial sectors such as automotive. Umeco’s Structural Materials business focuses on the development, manufacture and supply of advanced composite materials, and its Process Materials business focuses on the development, manufacture and supply of processing materials for the composites industry. Umeco is headquartered in the U.K. and reported revenues of £207 million ($332 million assuming a 1.60 exchange ratio) in its most recent financial year ended 31 March 2011.

The transaction is expected to be immediately accretive to Cytec’s earnings per share. It will extend Cytec’s portfolio of products, add new revenue streams, and enhance production capacity that will enable the combined company to leverage its strong customer relationships and partner network to expand distribution worldwide. Year one targeted synergies are in raw material costs, administrative areas and increasing aerospace revenue from added capacity which are approximately $15 million with additional synergies anticipated over time as we move through the integration process. The estimated EPS accretion for the remainder of 2012 is approximately $0.20 per share and full year 2013 is estimated at approximately $0.65 per share including synergies.

Upon completion of the transaction, Cytec will organise the combined assets in two separate reporting segments. Umeco’s advanced materials business will be integrated into a newly created High Performance Industrial Materials segment that will focus on non-aerospace growth markets. Cytec’s Engineered Materials segment will continue to focus on aerospace growth opportunities. Cytec does not anticipate significant workforce reductions resulting from this transaction, which is intended to accelerate growth in Industrial markets and thereby create additional opportunities for profitable growth.

Both companies have unanimously approved the transaction, each Umeco director intends to vote in favor of the transaction, as each Umeco director who holds Umeco share has irrevocably undertaken to Cytec in relation to Umeco shares in which he holds an interest. Cytec has also received irrevocable commitments from three shareholders to vote approximately 30% of Umeco’s outstanding shares in favor of the transaction. These irrevocable commitments are subject to certain conditions, further details of which are described in the Rule 2.7 announcement. The transaction is expected to close in the third quarter of 2012.

The transaction will be structured as a “scheme of arrangement” under English law, and is subject to the approval of Umeco shareholders as well as other customary closing conditions, including approvals from relevant regulatory authorities and the U.K. High Court. The acquisition will be subject to the terms and conditions set out in the announcement made today in the U.K., and subject to such further terms as will be set out in the scheme of arrangement document to be delivered to Umeco shareholders. To become effective, the scheme of arrangement requires, among other things, the approval of a majority in number of Umeco shareholders, present and voting either in person or by proxy, representing 75% or more in value of the Umeco shares held by all holders. The acquisition is also subject to customary regulatory approvals. Upon the scheme of arrangement becoming effective, it will be binding on all Umeco shareholders.

Barclays is acting as financial advisor to Cytec and Squire Sanders is acting as its legal advisor.

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