CLEVELAND, Jan. 21, 2013 /PRNewswire/ -- OM Group, Inc.
(NYSE: OMG) today announced a major step in its strategic evolution
with the signing of definitive agreements to exit its Advanced
Materials business. The transactions include the sale of the
downstream portion of the business, including its cobalt refinery
assets in Kokkola, Finland, to a
joint venture to be held by Freeport-McMoRan Copper & Gold Inc.
(NYSE: FCX), Lundin Mining Corporation (TSX: LUN) and La
Generale des Carrieres et des Mines (Gecamines), for total
potential consideration of up to $435
million, comprised of initial cash consideration of
$325 million and potential future
payments of up to an additional $110
million based on the business achieving certain revenue
targets over a period of three years. The sale is expected to close
before the end of April 2013, subject
to customary closing conditions and regulatory approvals. OM
Group also announced that its Board of Directors has authorized the
repurchase of up to $50 million of
its common shares.
"The divestiture of our cobalt business is the final step in
exiting our legacy commodity businesses and is consistent with our
strategy to move up the value chain into technology-based
businesses with attractive growth prospects and more predictable
earnings profiles," said Joe
Scaminace, Chairman and CEO of OM Group. "Following
the sale, the Company will be well-positioned to achieve its core
strategic objectives with a strong balance sheet and a clear vision
for the future. We plan to return capital to shareholders via
our recently authorized share repurchase program, and we will
continue to invest in our businesses to support our growth
strategy."
The Company said the transactions better position it to achieve
its core objectives to:
- Provide specialized, value-added solutions for its customers'
complex applications and demanding requirements;
- Expand its leading positions in markets with attractive global
growth trends, including automotive systems, electronic devices,
aerospace, general industrial and renewable energy;
- Complement its organic growth with synergistic acquisitions;
and
- Maximize total shareholder return through financial discipline,
optimal deployment of capital, business growth and continued
operational excellence.
Following the close of the sale, the Company expects to have
total cash on-hand of over $500
million, which it expects to efficiently deploy to repay a
substantial portion of its debt, repurchase up to $50 million of its shares, and support its
strategy of profitable organic and strategic growth.
In connection with the sale, OM Group will transfer its equity
interests in its DRC-based joint venture known as GTL to its joint
venture partners, subject to a security interest in favor of OM
Group with respect to the joint venture's performance of certain
supply arrangements.
"I want to extend my appreciation to our Advanced Materials
associates," said Mr. Scaminace. "They have a long track
record of operational excellence and commitment to customer
success. This transaction further strengthens the business by
providing a committed raw material supply stream and support from
one of the world's largest and most successful mining
companies."
SHARE REPURCHASE PROGRAM ANNOUNCED
OM Group also announced that its Board of Directors has
authorized the repurchase of up to $50
million of its common shares. The Company may utilize
various methods to effect the repurchases, which may include open
market repurchases, negotiated block transactions, accelerated
share repurchases or open market solicitations for shares, some of
which may be effected through 10b5-1 Plans. Any repurchases
would be funded from cash on hand or borrowings under the Company's
credit facilities. The timing of repurchases will depend on
several factors including market and business conditions, and the
repurchases may be discontinued at any time. The authorization
represents approximately 7% of the Company's current outstanding
common shares based on last Friday's closing price.
"We believe the long-term intrinsic value of the Company,
combined with our increased financial flexibility following the
exit of the Advanced Materials business, create an attractive
opportunity for repurchasing our shares," said Mr. Scaminace.
"We believe we have available capital resources to pursue these
share repurchases without disrupting our growth strategy, including
synergistic acquisitions."
BUSINESS UPDATE
The Company also commented that market conditions remained
difficult throughout the fourth quarter of 2012, particularly in
Europe and in global consumer
electronics markets. The Company reiterated its expectation for no
rare earth pricing benefits in the fourth quarter of 2012 and
stated that it now expects a significant lower-of-cost-or-market
charge to principally reflect decreased rare earth prices.
"Business conditions became more challenging than expected in
our recent fourth quarter, and these conditions persist at the
beginning of 2013," said Mr. Scaminace. "As a result, we are now
implementing a broad range of cost reduction initiatives. These
actions will contribute to our near-term financial performance and
improve our long-term cost structure, better positioning the
Company as macroeconomic conditions improve. The sale of the
Advanced Materials business further strengthens our balance sheet
and provides the capacity and flexibility to support these
operating improvements as well as our overall growth strategy." The
Company plans to provide more a comprehensive business update
during its regular fourth quarter investor conference call on
February 19, 2013.
CONFERENCE CALL SCHEDULED FOR TOMORROW, JANUARY 22, 2013 AT 10:00
AM ET
OM Group has scheduled a conference call for tomorrow,
January 22, 2013 at 10:00 AM ET for Mr. Scaminace and Chris Hix, Chief Financial Officer, to discuss
the transaction with the investment community. The conference call
will be available via webcast at www.omgi.com and by dialing
+1-800-344-0734 (US/Canada) or
+1-973-935-2082 and using the conference code #92004628. Replays of
the call will be available on the Company's website or by dialing
+1-855-859-2056 or +1-404-537-3406. Call materials will be
available on the Investor Relations section of the Company's
website before the call.
ABOUT OM GROUP
OM Group is a technology-based industrial growth company serving
attractive global markets, including automotive systems, electronic
devices, aerospace, general industrial and renewable energy. Its
business platforms use innovative technologies and expertise to
address customers' complex applications and demanding requirements.
For more information, visit the Company's website at
www.omgi.com.
FORWARD-LOOKING STATEMENTS
The foregoing discussion may include forward-looking statements
for purposes of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Such forward-looking
statements are based upon specific assumptions and are subject to
uncertainties and factors relating to the company's operations and
business environment, all of which are difficult to predict and
many of which are beyond the control of the company. These
uncertainties and factors could cause actual results of the company
to differ materially from those expressed or implied in the
forward-looking statements contained in the foregoing discussion.
Such uncertainties and factors include: successful completion of
the sale of our Advanced Materials business; successful execution
of the GTL supply agreement signed in connection with the Advanced
Materials sale; risks arising from uncertainty in worldwide
economic conditions; extended business interruption at our
facilities; fluctuations in the price and uncertainties in the
supply of rare earth materials and other raw materials; our ability
to identify, complete and integrate acquisitions aligned with our
strategy; restrictive covenants in our Senior Secured Credit
Facility which may affect our ability to operate our business
successfully; indebtedness may impair our ability to operate our
business successfully; changes in effective tax rates or adverse
outcomes resulting from examination of our income tax returns; the
majority of our operations are outside the United States, which subjects us to risks
that may adversely affect our operating results; level of returns
on pension plan assets and changes in the actuarial assumptions;
the majority of our cash is generated and held outside the United States; the timing and amount of
common share repurchases, if any; fluctuations in foreign exchange
rates; unanticipated costs or liabilities for compliance with
environmental regulation; changes in environmental, health and
safety regulatory requirements; technological changes in our
industry or in our customers' products; our ability to adequately
protect or enforce our intellectual property rights; disruption of
our relationship with key customers or any material adverse change
in their businesses; and the risk factors set forth in Part 1, Item
1a of our Annual Report on Form 10-K for the year ended
December 31, 2011.
SOURCE OM Group, Inc.