Elementis to acquire chromium business of US chemicals producer OxyChem

14-Oct-2002

Elementis, the international specialty chemicals company, has agreed to acquire the chromium chemical business of US based Occidental Chemical Corporation ("OxyChem") for an initial cash consideration of $40 million and up to $6 million in deferred consideration contingent on future performance. The transaction, which will be financed from existing borrowing facilities, is expected to complete by the end of 2002, subject to regulatory consents. Elementis believes that the acquisition and integration of OxyChem's chromium chemical business, located in North Carolina, with its own chromium chemical operations will generate significant cost savings through optimising operations, reducing overhead and procurement costs and obtaining supply chain benefits. Annualised cost savings of at least £10 million will be generated during the first two years and thus the transaction is expected to be accretive to Elementis' underlying earnings from 2003 onwards. One-time cash costs of restructuring the combined business are estimated to be £4 to £5 million in 2002. The transaction will create a single US producer able to compete more effectively in a market that is subject to significant import penetration and inefficient capacity utilisation as a result of the expected restriction on the use of chromated copper arsenate (CCA) for consumer applications announced by the US Environmental Protection Agency (EPA) earlier this year. OxyChem states that its chromium chemical business generated sales in 2001 of $80.3 million (£51.1 million), operating profit of $12.6 million (£8.0 million) and net assets of the business being acquired at 31 December 2001 were $58.6 million (£37.3 million). The comparable figures for Elementis Chromium were sales of £126.9 million, operating profit £2.6 million and net assets of £118.0 million. To reflect current market conditions Elementis anticipates that it will record an impairment charge against the net asset value of the existing Elementis Chromium assets of approximately 25-30 per cent in the accounts for the year ending 31 December 2002.

https://www.chemeurope.com/en/news/14825/elementis-to-acquire-chromium-business-of-us-chemicals-producer-oxychem.html