Ferro Corp. (FOE) to Acquire Al Salomi for Frit and Glazes in $39M Cash Deal
Ferro Corp. (NYSE: FOE) announced that it has signed a definitive agreement with the shareholders of Egypt-based tile coatings manufacturer Al Salomi for Frit and Glazes (“Al Salomi”) to acquire 100% of the equity of Al Salomi on a cash-free and debt-free basis, for approximately $39 million in cash, subject to working capital and other customary adjustments. The transaction will be funded with excess cash and a draw on the Company’s revolving credit facility. The transaction is expected to close within the next 60 days, subject to customary closing conditions.
Al Salomi is one of the leading manufacturers of frits and glazes in the Middle East and North Africa (“MENA”). Al Salomi’s 5,600-square meter plant, located in Suez, Egypt, is state-of-the-art, including continuous furnaces and computerized production lines and is expected to be one of Ferro’s lowest cost frit production sites. Current production capacity is 55,000 metric tons per year. An additional two lines, or 12,000 metric tons per year, of new tile coatings capacity is under construction and due to be operational by the end of 2015. The plant, which will be Ferro’s second frit production facility in Egypt, includes additional land and certain infrastructure assets to support expected growth.
Based on 2014 EBITDA, excluding expected synergies, the acquisition purchase price represents a transaction multiple of approximately 8.5. Including synergies and the commercial benefits associated with the two additional frit production lines now under construction, the transaction multiple would be approximately 5.7. The transaction is not expected to significantly impact Ferro’s 2015 earnings but is expected to be accretive to adjusted diluted earnings per share by $0.03 to $0.06 in 2016. Ferro expects the investment will achieve a return on invested capital of greater than 10% initially, and believes the return on invested capital will reach 15% once the capacity being added is fully utilized.
Commenting on the proposed transaction, Peter Thomas, Chairman, President and CEO of Ferro Corporation, said, “The acquisition of Al Salomi will bring Ferro much-needed production capacity in MENA, a very attractive tile market. We have been running at or near capacity levels at our existing plants in Spain and Egypt for some time, and this investment will provide needed capacity to meet growing demand in the area. This transaction is also strategically important, as it provides capacity to support expected growth from our recent investments in Turkey, which we are using as a base to increase our sales activity for tile and porcelain enamel products into this attractive and fast-growing region."
Mr. Thomas concluded, “The Al Salomi management team has done a remarkable job building the company into a market leader in a relatively short time by providing customers with high-quality products manufactured to exacting standards. We are pleased to add Al Salomi to the Ferro portfolio and look forward to working with the Al Salomi team to build on their impressive record of growth.”
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