OM Group, Inc. has announced a major step in its strategic evolution with the signing of definitive agreements to exit its Advanced Materials business. The transactions include the sale of the downstream portion of the business, including its cobalt refinery assets in Kokkola, Finland, to a joint venture to be held by Freeport-McMoRan Copper & Gold Inc., Lundin Mining Corporation, and La Generale des Carrieres et des Mines, for total potential consideration of up to $435 million, comprised of initial cash consideration of $325 million and potential future payments of up to an additional $110 million based on the business achieving certain revenue targets over a period of three years. The sale is expected to close before the end of April 2013, subject to customary closing conditions and regulatory approvals. OM Group also announced that its Board of Directors has authorized the repurchase of up to $50 million of its common shares.
"The divestiture of our cobalt business is the final step in exiting our legacy commodity businesses and is consistent with our strategy to move up the value chain into technology-based businesses with attractive growth prospects and more predictable earnings profiles," said Joe Scaminace, chairman and CEO of OM Group. "Following the sale, the company will be well-positioned to achieve its core strategic objectives with a strong balance sheet and a clear vision for the future. We plan to return capital to shareholders via our recently authorized share repurchase program, and we will continue to invest in our businesses to support our growth strategy."
The company said the transactions better position it to achieve its core objectives to:
- Provide specialized, value-added solutions for its customers' complex applications and demanding requirements;
- Expand its leading positions in markets with attractive global growth trends, including automotive systems, electronic devices, aerospace, general industrial, and renewable energy;
- Complement its organic growth with synergistic acquisitions; and
- Maximize total shareholder return through financial discipline, optimal deployment of capital, business growth, and continued operational excellence.
Following the close of the sale, the company expects to have total cash on-hand of over $500 million, which it expects to efficiently deploy to repay a substantial portion of its debt, repurchase up to $50 million of its shares, and support its strategy of profitable organic and strategic growth.
In connection with the sale, OM Group will transfer its equity interests in its DRC-based joint venture known as GTL to its joint venture partners, subject to a security interest in favor of OM Group with respect to the joint venture's performance of certain supply arrangements.
"I want to extend my appreciation to our Advanced Materials associates," said Scaminace. "They have a long track record of operational excellence and commitment to customer success. This transaction further strengthens the business by providing a committed raw material supply stream and support from one of the world's largest and most successful mining companies."