Nov 21 2006
OM Group has announced that it has entered into a definitive agreement to sell all of its nickel assets to Norilsk Nickel ("Norilsk") for $408 million in cash, on a debt-free/cash-free basis, plus a potential post closing adjustment for net working capital. The transaction, which has been unanimously approved by the Board of Directors of both companies, is subject to approval by regulatory authorities as well as other customary closing conditions.
Today's announcement is in line with OM Group's previously stated business objective to monetize its nickel business, which management has concluded is a non-core asset. The company expects to use the proceeds of the transaction to improve its financial flexibility and strengthen its position to grow operations, including through potential strategic acquisitions and increased new product development.
"This transaction represents an important step in our effort to re-tool OM Group's business model into one that delivers more predictable and sustainable financial results, and better positions us to continue to build long-term value for our shareholders," said Joe Scaminace, chairman and chief executive officer. "Through this transaction, we would simultaneously achieve three mission-critical objectives in our strategic transformation into a diversified specialty chemicals and advanced materials company. Those objectives are to focus the company on its strengths in developing and producing value-added specialty products for customers that serve dynamic markets; to lessen the impact of metal price volatility on our bottom line; and to support our aggressive growth plans."
The company believes that the timing for such a transaction is ideal given today's historically high nickel prices. "While our intent was not to try to time the market, we believe this is an ideal time in the base metals cycle to exit the nickel business. In our estimation, the current value of the business is greater than its future value as it's a capital intensive business for us where we have faced raw material feed constraints and significant price volatility," Scaminace said. "More important, we believe we have found a unique buyer for this business -- one that is well-positioned to create a broader working relationship with us."
Given the complementary geography and operations, OM Group believes there are unique synergies between the two companies that could be leveraged to advance their respective strategies, build on their core competencies and unlock value for their shareholders.
"At the conclusion of this transaction, OMG's Specialties segment will enter into five-year supply agreements with Norilsk's trading subsidiary that will, among other things, further strengthen our supply chain and secure consistent raw materials for our specialties business," said Scaminace. "The supply agreements include: up to 2,500 metric tons (mt) per year of cobalt metal, up to 2,500 mt per year of crude cobalt hydroxide concentrate and up to 1,500 mt per year of crude cobalt sulfate, along with various nickel-based raw materials used in OMG's electronic chemicals business."
The transaction is expected to close in the first quarter of 2007. The nickel business will be classified as a discontinued operation, including reclassification of prior periods, in all future filings. OM Group remains committed to providing the highest level of service to its nickel customers through the transition period, and it expects the change to new ownership to be seamless for employees and customers.
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