SWM (NYSE: SWM) today announced the signing of a definitive
agreement to acquire Tekra, LLC and Trient, LLC ("Tekra and
Trient'), converters of high-performance films and substrates,
significantly enhancing the Company’s films capabilities.
Tekra and Trient currently operate as divisions of EIS and are
based in the Milwaukee, Wisconsin area. The purchase price is
$155 million in cash (subject to certain customary closing
adjustments) and the transaction is expected to close before March
31, 2020.
Tekra and Trient Highlights
- Deep expertise in technical films converting, bringing new
capabilities to SWM’s AMS segment
- Key end-markets include medical, graphics, electronics, and
automotive, bolstering several existing SWM market presences,
creating access to new customers, and opening opportunities to
provide additional solutions to existing customers
- Approximately $100 million of sales with annual growth
projected in the 3% - 4% range, EBITDA margin approximately
16%
Strategic Commentary
SWM CEO Dr. Jeffrey Kramer, “Tekra and Trient
are strategic additions to our AMS growth platform and these
businesses complement many of the key attributes that are the
foundation of SWM. Tekra and Trient provide critical
components for their customers’ end products that meet demanding
technical requirements. Much like SWM, their focus is on
high-value applications and maintaining close customer
relationships that drive market leadership and strong financial
performance.”
“The conversion capabilities that these two
businesses provide will allow SWM to expand its suite of offerings
in key industries, including medical, graphics, electronics, and
automotive. Additionally, since we participate in many of the
end-markets Tekra and Trient serve, these expanded offerings
provide an array of long-term top-line synergy opportunities with
our AMS business. We see potential to leverage the favorable
long-term growth trends in specialty areas like medical diagnostic
testing and high-end graphics materials and cross-sell both
products and converting services across our customer base. We
also see opportunities to accelerate innovation and leverage our
global assets to build out an increased international presence for
these businesses.”
“This transaction will represent our fourth key
acquisition since we formed the AMS segment in 2013 and will
accelerate the segment towards $600 million of annual sales.
Since completing our last acquisition in 2017 we have fully
integrated our organization, including significant IT investments,
and delivered on synergies and organic growth plans for the
segment. Tekra and Trient are high-quality assets, ideal
strategic fits, and their people are well-regarded as technical and
service leaders within their industries. We look forward to
welcoming the talented individuals from these organizations who
will become part of SWM and our growing AMS segment.”
Carl Sommerstad, General Manager of both Tekra and Trient,
commented “The leadership teams at Tekra and Trient are excited to
join SWM. With similar cultures, operating strategies, and
focus on delivering customer value, we expect a seamless transition
and are confident we will see continued growth together.”
Transaction & Financial
Highlights
The transaction is expected to be accretive to
2020 Adjusted EPS; guidance for 2020 Adjusted EPS and this
acquisition’s financial impact will be detailed in the Company’s
upcoming fourth quarter earnings release on February 20th,
2020.
During 2020, the Company expects to incur
approximately $2 million of transaction and integration expenses;
purchase accounting expenses will be determined after the close of
the transaction. Consistent with prior transactions, Adjusted EPS
will exclude purchase accounting expenses, but include integration
and transaction expenses.
The transaction’s $155 million purchase price is
expected to be funded with the Company's existing credit
facility. At close, pro forma net debt to EBITDA per the
terms of the credit facility is expected to be approximately 2.7x
and is expected to return toward the low 2x range over the next two
years, absent further transactions. The Company believes it
has ample liquidity to continue an active M&A strategy.
Additional Information
Please visit the investor relations section of
the Company's website at www.swmintl.com to access a presentation
with additional details about Tekra's and Trient's products and
capabilities and strategic rationale for the acquisition. The
presentation is also attached as an exhibit to the 8-K filed in
conjunction with this release.
Advisors
Alston & Bird LLP, acted as legal counsel to
SWM in connection with the transaction.
About SWM
SWM is a leading global performance materials company. Our
highly engineered papers, films, nets and nonwovens are designed
and manufactured using natural fibers and polymers for a variety of
industries and applications. We provide our customers with critical
components that enhance the performance of their products. End
markets served include filtration, transportation, infrastructure
and construction, medical, industrial, tobacco, energy, food
services and home décor. SWM and its subsidiaries manufacture on
four continents, conduct business in over 90 countries and employ
approximately 3,400 people worldwide. For further information,
please visit SWM’s web site at www.swmintl.com.
About EIS
EIS, headquartered in Atlanta, GA, is a leading distributor,
fabricator, and converter of electrical process materials, wire,
cable and assemblies serving end-user segments in electrical power
and related markets. It provides more than 100,000 products from 38
branches and four fabrication facilities to more than 20,000
customers across North America. For more information, please
visit www.eis-inc.com.
Forward-Looking Statements
This press release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995 and other federal securities laws that are
subject to the safe harbor created by such laws and other legal
protections. Forward-looking statements include, without
limitation, those regarding 2020 guidance and future performance,
sales and volume trends, growth prospects, diversification efforts
of our AMS segment, future results of AMS operations, and other
statements generally identified by words such as "believe,"
"expect," "intend," "guidance," "plan," "forecast," "potential,"
"anticipate," "confident," "project," "appear," "future," "should,"
"likely," "could," "may," "typically," "will," and similar
words. These statements are not guarantees of future
performance and certain risks, uncertainties (some of which are
beyond the Company’s control) and assumptions that may cause actual
results to differ materially from our expectations as of the date
of this release. These risks include, among other
things, those set forth in Part I, Item 1A. Risk Factors of our
Annual Report on Form 10-K for the year ended December 31,
2018, which can be found at the SEC’s website www.sec.gov, as well
as the following factors:
- The integration of Tekra and Trient with SWM may not be
successful or anticipated benefits from the transaction may not be
realized;
- Risks associated with the implementation of our strategic
growth initiatives, including diversification, and the Company's
understanding of, and entry into, new industries and
technologies;
- Changes in the source and intensity of competition in our
market segments;
- Increases in input costs and lack of availability of such
materials could impact the sales and profitability of our
products;
- Adverse changes in the market sectors Tekra and Trient serve
impacting key AMS segment customers;
- Changes in the discount rates, revenue growth, cash flow growth
rates or other assumptions used by the Company in its assessment
for impairment of assets and adverse economic conditions or other
factors that would result in significant impairment charges;
- The failure of one or more material suppliers to supply
materials as needed to maintain our product plans and cost
structure;
- Risks associated with acquisitions or other strategic
transactions, including acquired liabilities and restrictions,
retaining customers from businesses acquired, achieving any
expected results or synergies from acquired businesses, complying
with new regulatory frameworks, difficulties in integrating
acquired businesses or implementing strategic transactions
generally and risks associated with international acquisition
transactions, including in countries where we do not currently have
a material presence; and
- Other factors described elsewhere in this document and from
time to time in documents that we file with the SEC.
Non-GAAP Financial Measures
Certain financial measures and comments
contained in this press release exclude restructuring expenses,
certain purchase accounting adjustments related to AMS segment
acquisitions, interest expense, income tax provision, and
depreciation and amortization. This press release also
provides certain information regarding the Company's financial
results excluding currency impacts. Financial measures which
exclude or include these items have not been determined in
accordance with accounting principles generally accepted in the
United States (GAAP) and are therefore "non-GAAP" financial
measures.
The Company believes that the presentation of
non-GAAP financial measures in addition to the related GAAP
measures provides investors with greater transparency to the
information used by the Company’s management in its financial and
operational decision-making. Management also believes that
the non-GAAP financial measures provide additional insight for
analysts and investors in evaluating the Company’s financial and
operational performance in the same way that management evaluates
the Company's financial performance. Management believes that
providing this information enables investors to better understand
the Company’s operating performance and financial condition.
These non-GAAP financial measures are not calculated or presented
in accordance with, and are not intended to be considered in
isolation or as alternatives or substitutes for, or superior to,
financial measures prepared and presented in accordance with GAAP,
and should be read only in conjunction with the Company's financial
measures prepared and presented in accordance with GAAP. The
non-GAAP financial measures used in this release may be different
from the measures used by other companies.
SOURCE SWM:
CONTACT
Mark ChekanowDirector of Investor
Relations+1-770-569-42291-800-514-0186
Web site: http://www.swmintl.com
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