Ferro Corporation (NYSE: FOE, “Company”) announced today that it has signed a definitive agreement with the shareholders of Barcelona-based Nubiola Pigmentos (“Nubiola”) to acquire 100% of the equity of Nubiola, on a cash-free and debt-free basis, for €146 million.
Based on 2014 EBITDA, excluding expected transaction synergies, the acquisition purchase price represents a transaction multiple of approximately 7X. The transaction will be funded with excess cash and a draw on the Company’s existing revolving credit facility. The transaction is expected to close within the next 60 days, subject to customary closing conditions.
Nubiola is a worldwide producer of specialty inorganic pigments and the world’s largest producer of Ultramarine Blue, a high-value pigment for plastics and construction industries due to its durability, unique color attributes and its whitening capability. Other products include specialty Iron Oxides, Chrome Oxide Greens and Corrosion Inhibitors. Nubiola generated 2014 annual sales of $119 million, based on the current euro exchange rate, and achieved compound annual growth of 4.1% over the last three years. The 101-year-old family-owned company employs approximately 750 people, including temporary employees, and has production facilities in Spain, Colombia, Romania, and India and a joint venture in China. Nubiola sells into more than 85 countries. The majority of Nubiola’s customers serve the plastics and construction industries.
The transaction is expected to be accretive to Ferro’s adjusted diluted earnings per share by $0.04 to $0.06 in 2015 and by more than $0.15 in 2016. Ferro expects the investment will achieve a return on invested capital of greater than 12% in the first full year of operations, and believes that synergies will improve return on invested capital to 15% within an acceptable time frame.
Commenting on the proposed transaction, Peter Thomas, Chairman, President and CEO of Ferro Corporation, said, “Nubiola is an excellent strategic fit with Ferro, as we strengthen our position as a global color solutions provider. The acquisition will significantly expand our product portfolio and geographic footprint and more than triple the size of our addressable market in inorganic pigments to greater than $1 billion. Nubiola will bring technology leadership on a global scale in Ultramarine Blue, along with a range of other high-value pigment and corrosion inhibitor product lines.”
He continued, “Our strengths are complementary. Nubiola’s largest end market is the plastics industry, while Ferro’s Complex Inorganic Color Pigments (CICP) business focuses predominantly on the coatings market. Nubiola and Ferro share distribution channels and we have identified a number of cross-selling opportunities, though there is minimal overlap between the two companies’ product lines. Nubiola’s business model of regional production and high-touch local technical service is consistent with Ferro’s current go-to-market strategy. As a part of Ferro, Nubiola will continue to advance its R&D programs and develop innovative products and color solutions for its customers.”
Mr. Thomas concluded, “The Nubiola family and management team have done a tremendous job building the company into a global leader in inorganic pigments. Nubiola has a reputation of quality and innovation and is highly respected by customers and competitors alike. We are very pleased to add Nubiola to the Ferro portfolio and are looking forward to working with the team to continue the company’s long tradition of successfully serving its customers.”
Ferro is embarking on the growth phase of its value creation strategy, and is seeking to expand sales in emerging markets, accelerate product development efforts, and acquire businesses that build upon its leading market positions in glass-based coatings and color solutions.