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Albemarle to acquire Rockwood

7/16/2014
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Albemarle and Rockwood Announce Merger to Create a Premier Specialty Chemicals Company
Combination Will Have Leading Positions Across Four High-Growth, High-Margin Businesses
Accelerates Growth Prospects and Generates over $1 Billion in Pro-Forma Adjusted EBITDA

BATON ROUGE, La. and PRINCETON, N.J.July 15, 2014 /PRNewswire/ -- Albemarle Corporation (NYSE: ALB) and Rockwood Holdings, Inc. (NYSE: ROC) announced today that they have entered into a definitive agreement under which Albemarle will acquire all outstanding shares of Rockwood in a cash and stock transaction valued at approximately $6.2 billion.  This combination reflects both companies' commitment to drive sustainable growth, creating one of the world's premier specialty chemicals companies, with market-leading positions across four high-margin businesses: lithium, catalysts, bromine and surface treatment.

Albemarle Corp. Logo.

Under the terms of the transaction, each outstanding share of Rockwood common stock will be exchanged for $50.65 in cash and 0.4803 of a share of Albemarle common stock. The transaction values Rockwood at$85.53 per share, a 13% premium based on yesterday's closing stock prices.  Upon closing of the transaction, Albemarle shareholders will own approximately 70% of the combined company and Rockwood shareholders will own approximately 30%.

The boards of directors of both companies have approved the transaction. The transaction is subject to shareholder and regulatory approvals and other customary closing conditions and is expected to close in the first quarter of 2015.

"The combination of these two companies creates a premier specialty chemicals company with a unique world-class team of experts and an enhanced focus on innovating customized, performance-based solutions to meet the ever-increasing demands of our customers," said Albemarle's president and CEO Luke Kissam. "The resulting company will have broader customer reach, increased diversity across end markets, technologies and geographies and more consistent and predictable earnings growth.  All four businesses have high margins, strong competitive positions, and attractive long-term growth.  The strong cash flows generated by these businesses will enable us to reduce leverage rapidly, support our ongoing dividend payments, and continue investing in the businesses to fuel growth and deliver increased value to our shareholders."

"This compelling transaction offers Rockwood shareholders an immediate premium and significant participation in the tremendous growth potential of the combined organization," said Robert J. Zatta, Rockwood's chief executive officer. "Our complementary specialty chemicals portfolios are expected to generate significant growth through the continued penetration of lithium-based energy storage products, compelling secular trends driving global catalyst growth, attractive surface treatment prospects and new bromine applications." 

The transaction brings together two of the world's leading specialty chemicals producers with strong market positions. All four businesses of the combined company have low-cost raw material access, highly specialized production assets and proven track records of delivering market-leading technology, product innovation, and customer service.  On a combined basis, the company is expected to drive growth through:

  • Continuing to penetrate lithium-based energy storage products, including e-mobility batteries and batteries for the automotive industry;
  • Capitalizing on attractive global trends in refinery catalysts, including the increasing demand for transportation fuels particularly in developing regions, as well as the demand for solutions to convert a range of feedstocks into high-value finished products;           
  • Expanding within existing bromine markets driven by the proliferation of digital technology, offshore deep water drilling and mercury control emission reduction, along with growth driven by new bromine applications;
  • Leveraging the company's position as a market-leading provider of surface treatment products and services to meet increasing customer demand for products with rigorous quality and performance standards and specifications.

Financial Highlights
The acquisition of Rockwood meets Albemarle's strategic and financial criteria for disciplined capital allocation. Rockwood's two businesses have global leadership positions in their markets, strong free cash flow profiles, premium performance-based products and margins, and attractive growth characteristics. The value of the transaction represents an 11.3x multiple of pro forma 2014 enterprise value to EBITDA, including synergies. 

Albemarle expects this transaction to be accretive to cash earnings per share in the first year, accretive to adjusted earnings per share in the second year, and substantially accretive thereafter.  Further, Albemarle will generate strong cash flow to reduce leverage rapidly. By 2016, Albemarle expects to fully realize approximately $100 million in annual cost synergies, primarily derived from implementing best practices throughout our operations, eliminating duplicative costs and achieving purchasing leverage and operational economies of scale. Pro forma for the transaction, Albemarle is expected to generate 2015 Adjusted EBITDA of over $1 billion and Adjusted EBITDA margins greater than 25%, along with annual free cash flow of approximately$500 million

Albemarle has secured committed financing from BofA Merrill Lynch to finance the cash portion of the transaction. Albemarle expects to maintain its current quarterly dividend and to reduce debt in the near-term. Given this pro forma financial profile, Albemarle expects to retain its investment grade ratings.

Additional Information 
Luke Kissam will serve as President and CEO of the combined company which will operate under the Albemarle name. Albemarle's board of directors will have 11 members, with eight Albemarle directors and three Rockwood directors. Jim Nokes will continue to serve as Albemarle's Non-Executive Chairman.

Advisors
BofA Merrill Lynch is acting as financial advisor to Albemarle and Shearman & Sterling LLPTroutman Sanders LLPKelley Drye& Warren LLP are acting as its legal advisors. Lazard and Citi are acting as financial advisors to Rockwood and Simpson Thacher & Bartlett LLP is acting as its legal advisor.