Cash for chromium
11 Oct 2002
Specialty chemicals company Elementis has agreed to acquire the chromium chemical business of US-based Occidental Chemical Corporation 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 be completed 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 optimised operations, reduced overhead and procurement costs.
Elementis said that annualised cost savings of at least £10 million would be generated during the first two years and that the transaction was expected to be accretive to Elementis' underlying earnings from 2003 onwards. One-time cash costs of restructuring the combined business were estimated to be £4 to £5 million in 2002.
OxyChem said 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 December 31 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.
