Schweitzer-Mauduit (SWM) to Acquire Argotec in $280M Deal

Schweitzer-Mauduit (NYSE: SWM) announced the signing of a definitive agreement to acquire Argotec LLC, a leading producer of highly engineered urethane films for demanding specialty applications in surface protection, glass lamination and medical products. The purchase price is $280 million in cash (subject to certain customary adjustments). Given the structure of the transaction and step-up in tax basis, SWM expects to realize tax benefits having an estimated net present value of $65 million. Assuming realization of all tax benefits, the after-tax economic cost of the transaction is estimated to be $215 million. The transaction is expected to close once customary closing conditions are met, which is anticipated to occur during the fourth quarter of 2015. Argotec is currently a portfolio company of Wind Point Partners, a private equity firm based in Chicago, Illinois.

Argotec Key Highlights

Leading manufacturer of thermoplastic polyurethane ("TPU") films, a highly engineered material with value-added properties such as durability, UV protection, heat resistance, and optical clarity

• High-value niche applications include vehicle paint protection, glass lamination for superior strength, medical wound care, and other industrial uses
• Approximately $115 million of annual revenue, EBITDA margins nearing 20%, and annual growth projected in the 5% - 7% range
• Expected 2016 Adjusted EPS accretion of approximately $0.20¹

Strategic Commentary

Frederic Villoutreix, Chairman of the Board and Chief Executive Officer of SWM, commented "We are pleased to announce the acquisition of Argotec as another key milestone in the transformation of SWM and the continued buildout of our non-tobacco business. This represents our fourth diversification transaction, including the late 2013 acquisition of DelStar. Argotec is a highly attractive asset and its core competencies and attributes align well with SWM. Much like DelStar, Argotec is a technology and quality leader in resin-based rolled goods with a strong competitive position. Argotec films, which are complementary to our current extruded resin production capabilities, generate strong margins and are used in a diverse set of attractive niche market segments, such as paint protection, glass lamination, medical and graphics. This acquisition offers solid growth prospects and further diversification for SWM."

"Argotec will be included in the Filtration segment, which will be renamed Advanced Materials and Structures, or AMS, as of our fourth quarter earnings release to reflect how we are strategically managing the business and focusing on our core technologies. With the addition of Argotec, we believe AMS achieves meaningful scale, with annual Net Sales approaching $300 million and adjusted operating margins in the mid-teens. Our AMS segment, anchored by the acquisitions of DelStar and Argotec, and enhanced by our recent bolt-on acquisitions, will have a strong foundation for continued top and bottom-line growth. These businesses have highly complementary technologies and end-markets, and our expanded leadership team is focused on extracting significant value from the combination of these assets. Similar to our past acquisitions, we expect Argotec to benefit from SWM's global footprint, international sales capabilities, Operational Excellence expertise, and intention to invest capital for growth. We look forward to welcoming the talented individuals from the Argotec organization who will become part of SWM and our growing Advanced Materials and Structures segment."

Guy Broadbent, President and Chief Executive Officer of Argotec, commented "We are proud of our growth under Wind Point Partners and our continued product leadership serving the demanding technical needs of our customer base. We are excited to be a part of the SWM team, which we believe shares our rigorous focus on quality and high technical standards. We will be well positioned to accelerate our growth in combination with the resources of SWM."

Transaction & Financial Highlights

Bob Cardin, Interim Chief Financial Officer of SWM, commented "This transaction is expected to be accretive to Adjusted EPS in 2016 by approximately $0.20. The transaction is expected to be funded by cash on hand and debt, either through an anticipated refinancing of the Company's existing credit facilities or the exercise of the accordion option in the Company's existing credit facility. At close, pro forma net debt to EBITDA is expected to be approximately 2.5x."

As part of the transaction, certain tax benefits are expected to be realized by SWM. SWM estimates the present value of these benefits to be $65 million. This acquisition and transaction-related expenses were not contemplated in SWM's previously issued 2015 guidance for Fully Diluted Adjusted EPS from Continuing Operations of $3.50².

Advisors
Moelis & Company acted as exclusive financial advisor and Sidley Austin LLP acted as legal counsel to SWM in connection with the Transaction. Pepper Hamilton LLP acted as legal counsel for Argotec.

Conference Call

SWM will hold a conference call to discuss this transaction with investors and analysts at 8:30 a.m. eastern time on Tuesday, September 22, 2015. You are invited to listen to the company's conference call that will be broadcast live over the Internet.

What: SWM's conference call announcing Argotec acquisition

When: Tuesday, September 22, 2015 at 8:30 a.m. Eastern Time

Where: http://www.swmintl.com

This link gives participants access to the live and/or archived event.
http://edge.media-server.com/m/p/xjjhxbss

How:

An operator will prompt participants to provide name, company name and phone number. For technical difficulties, press *0 and an operator will assist you.

You May Also Be Interested In

• UnitedHealth (UNH) beats earnings, revenue estimates in Q1; shares up
• Clearlake offers to acquire Blackbaud (BLKB) for $80 per share in cash
• Accenture Federal Services (ACN)to Acquire Cognosante