Journal Entry: 29 Sept. 2013
Market value of equity: $5,002.73 M
Debt: $1,294.20 M
Cash & Equivalents: $2,734.60 M
Enterprise Value: $3,562.33 M
Debt: $1,294.20 M
Cash & Equivalents: $2,734.60 M
Enterprise Value: $3,562.33 M
EBITDA less CapEx: $164.2 M
Pre-tax Cap Rate: 4.61%
Opinion
- opportunity to buy an attractive specialty chemical company poised for takeover
- $80 - $90 LBO target valuation for 2013 & 2014
- Core businesses: lithium & specialty treatment hold high potential given growth in electronic auto industry
- Lithium & Specialty treatment businesses hold high market share leadership; Globally No. 1 & No. 2, respectively
- optimizing pro forma cash on hand through organic growth, accretive acquisitions & return of capital to shareholders
Company
- originally made up of 4 main segments: Specialty Chemicals, Performance Additives, Titanium Dioxide Pigments and Advanced Ceramics
- first 2 phases of company's strategic history centered on organic growth, disciplined strategic acquisitions, seamless integration and cost control
- 2001-2005 mission: exceeded or met standard
- 1. Change company culture
- 2. Service the debt and remain within covenants
- 3. Grow through acquisitions
- 4. Take company public
- 2006-2010 mission: exceeded or met standard
- 1. Optimize portfolio
- 2. Execute bolt-on acquisitions for core businesses
- 3. Improve EBITDA margin
- 4. Pay down debt
- Management philosophy: delivered what's promised within an established track record
- small corporate center
- decentralized, accountable business units with detailed operational goals
- short term incentive plan focused on cash generation
- long term equity plan for executives; generate aligned shareholder ownership mindset
- on-site comms & motivation
- Management team reminds me of teams outlined in "The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success
Post Asset Sale Restructuring
- sold Titanium Dioxide Pigments, Color Pigments & Services, Timber Treatment Chemicals, ubber/Thermoplastics Compounding, and Water Chemistry
- Seifi Ghasemi, Chairman and Chief Executive Officer stated, “With the sale of these businesses, we have successfully completed, ahead of schedule, all of our key objectives for 2013...”
- initiatives for 2013 delivered:
- Repurchase $400 million of common shares: Acquired 6.23 million shares at an average price of $64.17/per share, completing the current program on September 5.
- Target dividend yield of 2.8% to 3.2%: Raised our quarterly dividend by nearly 30% to $0.45 per share from $0.35 per share in 2012.
- Repay debt of up to $600 million: Repaid more than $1.43 billion in principal loans related to secured term debt.
- Launch strategic process for non-core businesses: Concluded our process with the sale of seven non-strategic businesses for enterprise value aggregating approximately $3.9 billion, including Advanced Ceramics for EUR 1.49 billion, Clay Based Additives for USD 635 million and Titanium Dioxide Pigments and Other Non-Strategic Businesses for USD 1.325 billion, after adjusting for assumed pension obligations.
- Strategic Mission: global market position & industry tech leader, expected future adj. EBITDA margin +25, low exposure to oil-based raw materials
- Pro Forma key financials:
Competitors
Catalysts
- continued restructuring of core & non-core businesses allowing for a more focused enterprise
- increase in market multiple due to specialized and high cash margin business ops.
- continued goal of maximizing and returning shareholder value from talented executive & operational teams
- M&A interest for newly restructured company due to realized economic growth
Risk Considerations
- electric auto industry growth slower than expected
- Not everyone could do a deal of the company's size, so no M&A interest evolves
- Unexpected macroeconomic downturn particularly to Europe's auto industry
- global currency to US dollar issues; largely denominated in Euros
I have no positions in the above company mentioned, but may initiate a long position over the next 72 hours.
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