Creates a US$947 million revenue global
manufacturer of highly-engineered advanced materials.
Accretive transaction extends Luxfer’s reach in
higher growth end-markets and geographies.
Luxfer Holdings PLC (NYSE: LXFR) (“Luxfer”) and Neo
Performance Materials Inc. (TSX: NEO) (“Neo Performance Materials”
or “Neo”) today announced the signing of a definitive agreement
under which Luxfer would acquire Neo Performance Materials for
US$612 million* in cash and stock. The transaction accelerates
Luxfer’s strategy to become a leading global manufacturer of
highly-engineered advanced materials for high end applications.
Completion of the transaction, which was unanimously approved by
each company’s Board of Directors, is subject to shareholder
approval for each company and customary regulatory clearances and
closing conditions.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20181218005340/en/
Headquartered in Toronto, with corporate offices in Colorado and
Beijing, Neo Performance Materials is a global leader in the
innovation and manufacturing of rare earth and rare metal-based
functional materials used in many of today’s advanced technologies.
Neo has reported sales of US$454 million and Adjusted EBITDA of
US$69 million for the twelve months ended September 30, 2018. Neo’s
operating model has generated high free cash flow conversion with
strong margins and low capital expenditures. In addition, there is
significant additional capacity within their nine manufacturing
facilities to support growth.
Transaction Rationale
The acquisition of Neo accomplishes several strategic goals
toward enhancing shareholder value. The addition of Neo:
- Complements Luxfer’s current product
portfolio of high-performance engineered materials with high-value
rare earth and rare metal-based proprietary products, processes and
technologies;
- Expands Luxfer’s access to high-growth
Asian markets, diversifying its customer base and creating a more
direct path to procure raw materials;
- Creates cross-selling opportunities
across both companies’ customers and geographies;
- Positions Luxfer to better serve its
customers in rare-earth chemicals and oxides, including
zirconium-based chemicals, for critical applications; and
- Immediately adds to Luxfer’s earnings
per share.
“Neo Performance Materials significantly enhances our global
leadership in the innovation and manufacturing of rare earth and
rare metal-based functional materials, which are essential inputs
to high-growth, future-facing industries,” stated Alok Maskara,
Chief Executive Officer of Luxfer. “Neo’s Magnequench segment is an
industry leader in rare-earth powders used to manufacture magnets
for performance micro motors and other critical applications, while
the Chemicals and Oxides segment complements Luxfer’s own
zirconium-based chemicals business. We warmly welcome Neo
Performance Materials’ skilled employees and leadership and look
forward to establishing a common high-performance culture focused
on meeting the needs of our customers.”
Geoff Bedford, Chief Executive Officer of Neo Performance
Materials, said, “The combination of Luxfer and Neo creates a
global leader of highly-engineered advanced materials which are
critical to many of today’s macro global trends including those
promoting energy efficiency and environmental sustainability.
Luxfer’s strategy is complementary to Neo’s in that we both have
focused on deep customer relationships, strong product development
capabilities, cost-competitive manufacturing and global reach,
which has allowed us to uniquely position ourselves in our
respective markets. This combination will enable our businesses to
reach the next level as an important part of a larger, more
diversified company. We look forward to this transaction and
believe our employees, partners, shareholders and customers around
the world will benefit greatly as a result.”
Transaction Details and Synergies
The transaction will be effected via a Plan of Arrangement
pursuant to section 182 of Business Corporation Act (Ontario). Upon
completion of the transaction, shareholders of Neo Performance
Materials will receive US$5.98 in cash and 0.395 Luxfer shares for
each common share of Neo Performance Materials. Post transaction,
current Luxfer shareholders will own approximately 63% of the
combined company on a pro forma basis.
Luxfer has arranged US$375 million in committed financing in a
syndicated term loan B to fund the cash portion of the purchase
price, fees and expenses, and refinance existing debt.
The transaction is expected to realize at least US$15 million of
cost synergies, largely from the elimination of duplicative public
company costs and sourcing benefits from vertical integration of
rare earths. In addition, integration of Luxfer’s zirconium
chemicals business with Neo’s Chemicals and Oxides unit is expected
to lead to growth synergies.
The two largest shareholders of Neo, which are affiliates of
Oaktree Capital Management, L.P., have entered into a voting and
support agreement for the transaction, which includes an agreement
to sign a lock-up for the newly issued Luxfer shares upon closing.
Members of the Boards of Directors of Luxfer and Neo have also
entered into voting support agreements for the transaction. At
close of the transaction, Oaktree will own approximately 24% of
Luxfer ordinary shares outstanding. Upon closing, it is anticipated
that some members of the current Neo Board of Directors will join
Luxfer’s Board.
The transaction is expected to be completed during the second
quarter of 2019, following regulatory clearances, shareholder
approvals and satisfaction of closing conditions.
Pro forma Financial Performance
On a pro forma basis, the combined entity had US$947M million in
revenue and Adjusted EBITDA of US$148 million on a trailing
twelve-month basis. Also, the combined company will continue to
benefit from a strong balance sheet, with modest pro forma net
leverage of approximately 2.0x.
Luxfer will provide forward-looking guidance for the combined
company upon closing of the transaction and expects to maintain its
target of 8-10% increases in EBITDA annually through continued
internal performance improvements, deal-related synergies and
revenue growth.
Jefferies Group LLC acted as exclusive financial advisor to
Luxfer, while Barclays Capital Canada Inc. acted as financial
advisor to Neo.
Investor Conference Call
Luxfer will hold an investor conference call with its senior
management today, Tuesday, December 18, 2018 at 8:30 am ET, with
the following dial-in details:
- USA: (877) 341-8545
- International: (908) 982-4601
Confirmation Code: 3579545
Webcast Link:
https://event.webcasts.com/starthere.jsp?ei=1224704&tp_key=17bcf1c410
A replay of the conference call will be available until December
24, 2018 at:
- USA: (800) 585-8367
- International: (404) 537-3406
Confirmation Code: 3579545
About Luxfer Holdings PLC
Luxfer is a global manufacturer of highly-engineered advanced
materials, which focuses on value creation by using its broad array
of technical knowhow and proprietary technologies. Luxfer’s
high-performance materials, components, and high-pressure gas
containment devices are used in defense and emergency response,
healthcare, transportation, and general industrial settings. For
more information, visit www.luxfer.com. Luxfer is listed on the New
York Stock Exchange and its ordinary shares trade under the symbol
LXFR.
About Neo Performance Materials
Neo Performance Materials is a global leader in the innovation
and manufacturing of rare earth and rare metal-based functional
materials, which are essential inputs to high technology, high
growth, future-facing industries. The business of Neo Performance
Materials is organized along three segments: Magnequench, Chemicals
& Oxides and Rare Metals. Neo Performance Materials is
headquartered in Toronto, Canada, with corporate offices in
Greenwood Village, Colorado, and Beijing, China. Neo Performance
Materials operates globally with sales and production across 10
countries, being Japan, China, Thailand, Estonia, Singapore,
Germany, United Kingdom, Canada, United States and South Korea. For
more information, please visit www.neomaterials.com. Neo
Performance Materials is listed on the Toronto Stock Exchange and
its common shares trade under the symbol NEO.
*Note: Transaction value based on share price at close of
business on December 14, 2018.
Forward-Looking Statement
This release contains certain forward-looking statements that
involve risks and uncertainties that could cause actual results to
differ materially from those contained in the forward-looking
statements. Examples of such forward-looking statements include but
are not limited to: (i) statements regarding the results of
operations and financial condition of each Luxfer, Neo and the
combined company; (ii) statements of plans, objectives or goals of
each of Luxfer, Neo and the combined company and its respective
management of proposed management, including those related to
financing, products or services; (iii) statements of future
economic performance; and (iv) statements of assumptions underlying
such statements. Words such as “believes,” “anticipates,”
“expects,” “intends,” “forecasts” and “plans” and similar
expressions are intended to identify forward-looking statements but
are not the exclusive means of identifying such statements. By
their very nature, forward-looking statements involve inherent
risks and uncertainties, both general and specific, and risks exist
that the predictions, forecasts, projections and other
forward-looking statements will not be achieved. Each of Luxfer and
Neo caution that a number of important factors could cause actual
results to differ materially from the plans, objectives,
expectations, estimates and intentions expressed in such
forward-looking statements. These factors include, but are not
limited to: (i) future revenues of the companies being lower than
expected; (ii) increasing competitive pressures in the industry;
(iii) general economic conditions or conditions affecting demand
for the services offered by each of Luxfer, Neo and the combined
company in the markets in which they operate or propose to operate,
both domestically and internationally, including as a result of the
Brexit referendum, being less favorable than expected; (iv)
worldwide economic and business conditions and conditions in the
industries in which each of Luxfer and Neo operate; (v)
fluctuations in the cost of raw materials and utilities; (vi)
currency fluctuations and hedging risks; (vii) ability to protect
intellectual property; and (viii) the significant amount of
indebtedness Luxfer has incurred and may incur and the obligations
to service such indebtedness and to comply with the covenants
contained therein. Each of Luxfer and Neo caution that the
foregoing list of important factors is not exhaustive. These
factors are more fully discussed in the sections “Forward-Looking
Statements” and “Risk factors” in Luxfer’s Annual Report on Form
20-F for the year ended December 31, 2017, filed with the U.S.
Securities and Exchange Commission on March 19, 2018, and Neo’s
Annual Information Form for the year ended December 31, 2017
discussed in the sections “Forward-Looking Information” and “Risk
Factors” filed with the Canadian Securities Administrators and
available on SEDAR at www.sedar.com. When relying on
forward-looking statements to make decisions with respect to Luxfer
and Neo, investors and others should carefully consider the
foregoing factors and other uncertainties and events. Such
forward-looking statements speak only as of the date on which they
are made, and Luxfer and Neo do not undertake any obligation to
update or revise any of them, whether as a result of new
information, future events or otherwise.
Additional Information and Where to Find It
Luxfer will file with the SEC and mail to its stockholders a
proxy statement in connection with the proposed transaction. We
urge investors and security holders to read the proxy statement
when it becomes available because it will contain important
information regarding the proposed transaction. You may obtain a
free copy of the proxy statement (when available) and other related
documents filed by Luxfer with the SEC at the SEC’s website at
www.sec.gov. You also may obtain the proxy statement (when it is
available) and other documents filed by Luxfer with the SEC
relating to the proposed merger for free by accessing Luxfer’s
website at www.luxfer.com by clicking on the link for “Investors,”
then clicking on the link for “SEC Filings.”
Participants in the Solicitation
Luxfer and its directors and executive officers may be deemed to
be participants in the solicitation of proxies from Luxfer’s
stockholders in connection with the proposed transaction.
Information regarding the interests of these directors and
executive officers in the proposed transaction will be included in
the proxy statement when it is filed with the SEC. You may find
additional information about Luxfer’s directors and executive
officers in Luxfer’s Annual Report on Form 20-F, which was filed
with the SEC on March 19, 2018. You can obtain free copies of these
documents from Luxfer using the contact information below.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181218005340/en/
Luxfer Investor Contact:Douglas A. Fox, CFADirector,
Investor Relations
Cassandra StanfordCommunications Specialist(951)
341-2375Investor.relations@luxfer.com
Neo Investor Contact:Ali MahdaviInvestor Relations(416)
962-3300ir@neomaterials.com
Neo Performance Materials (TSX:NEO)
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