Cytec Industries have announced today it has completed the sale of the former Umeco distribution product line to Cathay Investments for total consideration of 5.5 million GBP subject to customary post-close adjustments.
The sale is expected to result in a second quarter pre-tax loss of approximately $12.5 million. The divestiture was factored into Cytec’s previously communicated sales and as-adjusted earnings guidance. The Distribution product line had revenues of approximately $20 million in the first five months of 2013.
Effective immediately, Cathay Investments will rename the business to form Cathay Composites, the new company will continue Ashland’s distribution and agency accounts, retaining the existing management and organisational structure in the United Kingdom, Scandinavia, Estonia and Finland. Cathay Composites will distribute Ashland’s full line of polyester and vinyl ester resins, premium gelcoats and low-profile additives to the, marine, building and construction and transportation markets.
Andrew Miller, sales director composites, Ashland Performance Materials said;
We are excited to continue our long-standing, successful relationship with Umeco, now named Cathay Composites, together, we offer our customers a broad portfolio of industry-leading product lines. We look forward to leveraging the local knowledge of our new partner to deliver clear best-in-class composites products and services.
Additionally, effective immediately, Quimidroga France will take over Ashland’s distribution and agency accounts from Umeco, and will distribute Ashland’s full line of polyester and vinyl ester resins and premium gelcoats and low-profile additives to the composites market in France. Quimidroga currently distributes Ashland’s complete portfolio of composites products to manufacturers in Spain, Portugal and North Africa.
Cytec also announced, in agreement with its joint venture partner, it has exited and shutdown their Process Materials Joint Venture in China and will enter liquidation. The Joint Venture, which served the Chinese wind market, was operated under the Industrial Materials business and was acquired as part of the Umeco acquisition. Cytec’s share of the venture’s operating losses were approximately $0.6 million annually. The closure will result in a second quarter pre-tax charge of approximately $3.3 million.
The company also outlines its initiative to move all production operations from the Costa Mesa, Adelanto and Huntington Beach, California sites, each acquired from the Umeco acquisition, into its Winona, Minnesota and Tulsa, Oklahoma locations. Approximately 120 employees will be impacted by this move. The estimated total cost of this initiative is approximately $27 million which includes about $13 million of capital required to move the products into the existing operations and approximately $3.5 million for non-cash accelerated depreciation expense. The remaining costs are for retention and severance plans, product re-qualifications, certain lease liabilities on impacted facilities and clean-up costs. Product resites and re-qualifications will begin immediately with final completion by year-end 2014 and once completed, annual savings are expected to be $3 to $4 million. Final closure of these California facilities is expected by mid-2015. As a result of the above, Cytec will record a pre-tax restructuring charge in the second quarter of 2013 of approximately $1 million with essentially all of the expense amount recorded over the second half of 2013 and full year 2014.