 Albemarle
Acquisition of Rockwood July 15, 2014
A Compelling Combination to Accelerate Albemarle’s Growth
Filed by Albemarle Corporation
(Commission File No.: 1-12658)
Pursuant to Rule 425 of the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: Rockwood Holdings, Inc.
(Commission File No: 1-32609) |
 Forward
Looking Statements Some of the information presented in this document and
discussions that follow, including, without limitation, statements with respect to the
transaction
and
the
anticipated
consequences
and
benefits
of
the
transaction,
the
targeted
close
date
for
the
transaction,
product
development,
changes in productivity, market trends, price, expected growth and earnings, cash
flow generation, costs and cost synergies, portfolio diversification,
economic trends, outlook and all other information relating to matters that are not historical facts may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. There can be no assurance that actual results will not differ
materially. Factors that could cause actual results to differ materially include, without limitation: the receipt and timing of necessary
regulatory approvals; the ability to finance the transaction; the ability to
successfully operate and integrate Rockwood’s operations and realize
estimated synergies; changes in economic and business conditions; changes in
financial and operating performance of our major customers and industries
and markets served by us; the timing of orders received from customers; the gain or loss of significant customers; competition
from
other
manufacturers;
changes
in
the
demand
for
our
products;
limitations
or
prohibitions
on
the
manufacture
and
sale
of
our
products;
availability of raw materials; changes in the cost of raw materials and energy;
changes in our markets in general; changes in laws and government regulation
impacting our operations or our products; the occurrence of claims or litigation; the occurrence of natural disasters;
political unrest affecting the global economy; political instability affecting our
manufacturing operations or joint ventures; changes in accounting
standards;
changes
in
the
jurisdictional
mix
of
our
earnings
and
changes
in
tax
laws
and
rates;
volatility
and
substantial
uncertainties
in
the
debt
and
equity
markets;
technology
or
intellectual
property
infringement;
decisions
we
may
make
in
the
future;
and
the
other
factors
detailed
from
time to time in the reports we file with the SEC, including those described under
"Risk Factors" in our Annual Report on Form 10-K and our
Quarterly Reports on Form 10-Q. These forward-looking statements speak only
as of the date of this communication. We expressly disclaim any obligation
or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in
our expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based. Information with respect
to Rockwood, including non-GAAP information is taken or derived from Rockwood's public filings and management
estimates and we take no responsibility for the accuracy or completeness of such
information. It should be noted that this presentation contains certain
financial measures, including Net Sales, and Segment Income, that are not required by, or presented in accordance with, accounting
principles generally accepted in the United States, or GAAP. These measures are
presented here to provide additional useful measurements to review our
operations, provide transparency to investors and enable period-to-period comparability of financial performance. A description of
non-GAAP financial measures that we use to evaluate our operations and
financial performance, and reconciliation of these non-GAAP financial
measures
to
the
most
directly
comparable
financial
measures
calculated
and
reported
in
accordance
with
GAAP,
can
be
found
in
the
Investors
section
of
our
website
at
www.albemarle.com,
under
“Non-GAAP
Reconciliations”
under
“Financials.”
2 |
 Speakers
on Today’s Call 3
Robert Zatta
Scott Tozier
Chief Executive Officer and
Chief Financial Officer,
Rockwood Holdings
Senior Vice President and
Chief Financial Officer,
Albemarle Corporation
Luke Kissam
President and Chief
Executive Officer,
Albemarle Corporation |
 Luke
Kissam President and Chief Executive Officer
Albemarle Corporation |
 A
Compelling Transaction 5
•
Creates industry leader across four attractive growth markets
•
Accelerates growth and further enhances margins
•
Diversifies portfolio across end markets and geographies
•
Provides substantial synergy opportunity
•
Generates significant free cash flow to reduce leverage rapidly
Delivers predictable earnings growth to drive value creation
»
Lithium
»
Catalysts
»
Bromine
»
Surface Treatment |
 Transaction Overview
6
Key Terms
•
$6.2 billion equity value
•
$50.65 in cash and 0.4803 of a share of Albemarle stock per Rockwood share
•
~60% cash / ~40% stock
•
$85.53 per Rockwood share, a 13% premium to closing price on July 14
•
~70% Albemarle shareholders and ~30% Rockwood shareholders
Financial Impact
•
Accretive to cash EPS in year one and adjusted EPS in year two
•
Substantially accretive to EPS thereafter
•
Approximately $100 million cost synergies
•
$500 million+ annual free cash flow
Governance
•
Luke Kissam to lead combined company as president and CEO
•
Jim Nokes to continue as Non-Executive Chairman
•
11 member Board: 8 Albemarle directors and 3 Rockwood directors
Financing
•
Committed financing in place
•
Expect to maintain investment grade rating
Closing
Conditions
•
Closing expected in Q1 of 2015
•
Subject to shareholder and regulatory approvals |
 #2
$770
$174
23%
Surface Treatment
7
Global
Ranking
2013A
Revenue
EBITDA
(1)
% Margin
(1)
Key
Competitors
Leadership Across Four Highly Attractive Growth Segments
Lithium
#1
$479
$182
38%
Growth
2.0x
–
3.0x
GDP
Refinery & Polyolefin
Catalysts
(2)
#1/2
1.0x
–
2.0x
GDP
Bromine
(2)
#1/2
1.0x
–
1.5x
GDP
1.0x
–
2.0x
GDP
Characteristics
•
Mineral extraction and processing businesses
•
Low cost position on global cost curve
•
Vertically integrated
•
High demand growth
•
Technology driven
•
Critical customer service
•
Ability to differentiate offering
•
Strong free cash flow
$1,002
$267
27%
$1,392
$361
26%
Source: Company information.
Note: USD in MM.
(1) EBITDA & EBITDA margin calculated before corporate
overhead expenses (2)
Excludes the impact of rare earth and the recently announced proposed divesture of
Albemarle’s antioxidant, ibuprofen and propofol businesses and assets |
 8
Source: Company filings.
(1)
Not adjusted for divestiture of Antioxidants , Ibuprofen, and propofol businesses
announced in April 2014. (2)
Excludes discontinued operations.
Increased Diversity Across End Markets and Geographies
Geography
End Markets
Albemarle
(1)
Rockwood
(2)
Combined
(1)
Americas
EMEA
Asia
ROW
Aerospace/Utilities
Automobile
Chemicals/Plastics
Construction
Electronics
Pharma/Life Sciences
Metal Treatment
Other
Refining/Oilfield
46%
31%
22%
21%
53%
16%
10%
37%
39%
20%
4%
33%
22%
12%
11%
9%
5%
4%
2%
2%
8%
5%
9%
25%
1%
14%
30%
8%
21%
18%
9%
10%
6%
12%
3%
6%
3%
11%
Agriculture/Food Safety |
 Attractive Growth Opportunities Across Businesses
•
Lithium –
Efficient Energy Storage
•
Bromine –
Leveraging New Applications
•
Catalysts –
Energy Demand & Improving Environmental Standards
•
Surface Treatment –
Differentiated Customer Service and Innovation
9
»
Consumer electronics
»
Automotive
»
Stationary batteries
»
Digital technology
»
Offshore deep water drilling
»
Mercury control emission reduction
»
Fuel consumption in developing economies
»
Clean air/clean fuel mandates
»
Increasingly complex crude slates
»
Automotive and components
»
Aerospace industries
»
General industry |
 Robert
Zatta Chief Executive Officer & Chief Financial Officer
Rockwood Holdings |
 Rockwood
Today: Pure Play On Lithium & Surface Treatment 11
Strategic Transformation
Rockwood
Early 2013
Exited Non-Core
Businesses
Continued Investments in
Core Businesses
2014
CeramTec
Clay-based
Additives
Pigments
(Pending)
Talison Lithium
(Acquired 49%)
Today, Rockwood is
focused on two high
quality businesses:
Lithium and Surface
Treatment
Both are high margin,
high growth and #1 or #2
in their industries
Increased Ownership
in China & India JVs
Rockwood has strategically transformed into a pure play
lithium / surface treatment business |
 Albemarle and Rockwood are an Excellent Fit
•
Similar Business Profile
»
Focused portfolio of high quality businesses
»
Strong #1 / #2 positions in high growth markets
»
High margin businesses
•
Synergistic Manufacturing Processes
»
Advanced extraction and processing technologies in both Lithium and Bromine
»
Market-leading technologies and record of innovation
•
Complementary Cultures
»
Shared values and focus on innovation
»
High standards for performance and execution
•
Attractive Opportunity
»
Opportunity to participate in significant upside of combined company
12 |
 Scott
Tozier Senior Vice President and Chief Financial Officer
Albemarle Corporation |
 Significant Financial Benefits
14
Improved
Revenue
Growth
•
Consistent, predictable growth significantly above GDP
Earnings
Accretive
•
Accretive to cash EPS in year one and adjusted EPS in year two
•
Substantially accretive thereafter
Strong Free
Cash Flow
•
Focus on rapid deleveraging in near term
•
Expect to maintain current annualized dividend of $1.10 per share
Industry-
leading
Margins
•
Pro-forma EBITDA margins of 25%+ |
 Rockwood
Pro-Forma Adjustments 15
2014E Pro-Forma EBITDA
Pro-Forma Cash & Net Debt
Reported Net
Debt:
($166MM)
Adjusted Net
Debt:
($653MM)
Source: Company filings and Wall Street Estimates.
Note: USD in MM.
Closed on
May
28
th
,
2014
Closing
Expected by
September
2014
~$350
~$50
$100
$490
$200
$250
$300
$350
$400
$450
$500
Base EBITDA
(Consensus)
Talison JV
Run rate
Synergies (PF)
Pro
-forma
EBITDA
$1,461
($513)
$1,000
$1,947
$500
$1,000
$1,500
$2,000
$2,500
3/31/2014 Cash
and Equivalents
Cash Contribution
to Talison JV
Cash From TiO2
and Other
Businesses Sale to
Huntsman
Pro
-forma Cash
EBITDA of
Lithium and
Surface
Treatment
Businesses
(excludes
businesses
to be sold to
Huntsman)
EBITDA from
49% share in
Talison JV
Pro-Forma
for a full year
Run-rate
synergies
on a
Pro-forma
basis
EV / EBITDA
with
Synergies:
11.3x |
 •
Cost synergies of ~$100 million to be fully realized in 2016
»
Eliminate redundant costs
»
Transition back office services to low cost shared service centers
»
Improve sourcing costs based on increased scale
»
Leverage expertise to drive production synergies in extracting Bromine and
Lithium »
High throughput experimentation capabilities in surface treatment and refinery and
polyolefin catalysts businesses
16
Meaningful, Highly Executable Synergies |
 Financing Plan
17
•
$6.2B purchase price
»
Financing commitments from BofA Merrill Lynch:
o
$2.2B available cash
o
$1.5B debt financing
»
$2.5B Albemarle common stock (34.7 million new shares)
•
Rockwood $1.25B notes due 2020 to be guaranteed by Albemarle
•
3.5x pro-forma Net Debt-to-2014E EBITDA including synergies
•
Expect to maintain investment grade rating |
 18
Strong Free Cash Flow
•
$500M+ annual free cash flow
•
Focus on rapidly reducing leverage
•
CAPEX in the range of 4-6% of revenue
•
Remain committed to previously announced working capital reduction of $100M by
2015 •
Expects to maintain current annualized dividend of $1.10 per share
(1)
(1)
2015PF and Next 3-5 years FCF yield calculated using pro-forma market
capitalization post Rockwood acquisition (1)
$317
$282
$203
$275
$365
$500
$600-$900
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
$0
$200
$400
$600
$800
$1,000
2010A
2011A
2012A
2013A
2014PF
2015PF
3-5 years |
 •
Creates a premier specialty chemicals company with leading positions in
attractive end markets around the world
•
Accelerated
growth
potential
across
four,
high-margin
businesses
–
lithium,
catalysts, bromine and surface treatment
•
Differentiated, performance-based, technologies driving innovative solutions
•
Capacity in place to serve future growth to drive improved
profitability •
Outstanding cash generation capacity supports rapid deleveraging, ongoing
dividend and investments to drive future growth
19
Albemarle:
A
Compelling
Investment
Opportunity |
 Appendix |
 Rockwood
Overview 21
Source: Company information.
Note: USD in MM.
(1)
Pro-Forma for all announced divestitures
(2)
Includes Corporate and Other net sales of $126MM and $128MM, respectively for 2012
& 2013 and Adjusted EBITDA of ($16)MM and ($33)MM respectively for 2012
& 2013 respectively (3)
Please refer to company website for non-GAAP financial measure
reconciliations. Key Financials
(1)
2012A
2013A
Net Sales
(2)
$1,324
$1,378
Adjusted EBITDA
(2 )
$321
$323
% Margin
24.2%
23.5%
Lithium (35% of 2013 Net Sales)
2012A
2013A
Net Sales
$474
$479
Adjusted EBITDA
$182
$182
% Margin
38.4%
38.0%
Surface Treatment (56% of 2013 Net Sales)
2012A
2013A
Net Sales
$723
$770
Adjusted EBITDA
$155
$174
% Margin
21.4%
22.6%
•
Secure access to significant and diverse long term lithium reserves
»
Second largest brine producer globally with operations in U.S.
and Chile
»
Largest spodumene mine, with acquisition of 49% in Talison
•
One of the lowest cost producers due to high quality brine (Chile)
•
Integrated business model from resource to downstream specialty
products
•
Longest history in the business with experienced management
•
Key customers: Bayer, Sygenta, DSM, Samsung and Umicore
•
Key industries served: pharma, agriculture, batteries, plastics etc.
•
Sole dedicated surface treatment business with significant global
presence
•
Portfolio approach for balanced and diversified customer base across
size, industries and technologies
•
Leading reputation for top customer service, technology knowhow and
product innovation
•
Low capex requirements; robust free cash flows
•
Key customers: Airbus, ArcelorMittal, Ford, Daimler, Volkswagen and
Renault Nissan
•
Key industries served: automotive, industrials, aerospace
•
#2 Globally
•
Excellent cash generation
•
Solid market position
•
#1 integrated global producer
•
Lowest cost and most diversified resources
•
Break-out potential |
 Albemarle Overview
22
Source: Company information.
Note: USD in MM.
(1) Includes corporate overhead and excludes proposed divesture of antioxidant,
ibuprofen and propofol businesses and assets and special and non-operating pension and OPEB items
(2)
Excludes the impact of rare earth and the recently announced proposed divesture of antioxidant,
ibuprofen and propofol businesses and assets Key Financials
2012A
2013A
Net Sales
$2,519
$2,394
Adjusted EBITDA
$684
$557
% Margin
27.2%
23.3%
Catalyst Solutions (40% of 2013 Net Sales)
2012A
2013A
Net Sales
(2)
$1,067
$1,002
Adjusted EBITDA
(2)
$309
$267
% Margin
29.0%
26.6%
Performance Chemicals (60% of 2013 Net Sales)
2012A
2013A
Net Sales
(2)
$1,451
$1,392
Adjusted EBITDA
(2)
$437
$361
% Margin
30.1%
25.9%
•
Positioned to capitalize on mega-trends in rising fuel consumption,
more stringent air quality mandates and growing consumerism
•
Deep customer understanding
•
Heavy investment in R&D
•
Unparalleled network of partnerships and alliances
•
Broad depth and experienced management team
•
Key customers: Exxon Mobile, Shell, Dow, LG, Samsung
•
Key industries served: oil refineries, automotive, plastics etc.
•
Secure access to significant and diverse long term bromine reserves
•
Recent
capacity
additions
providing
flexibility
and
beginning
to
pay
dividends
•
Broad product portfolio for widest range of electrical and electronic
applications across all markets
•
Strong growth driven by global energy demand, increased deep water
drilling, mercury control and food safety standards, growing data traffic
and more complex automotive electronics
•
Key industries served: drilling and oil service, agriculture,
pharmaceutical, water treatment, chemical processing, semiconductor
makers
•
#1 Bromine Producer
•
Excellent cash generation
•
#1 in Refinery Catalysts
•
#2 in Polyolefin Catalysts
•
Excellent cash generation
(1) |
 Additional Information
Important Information for Stockholders and Investors
Nothing in this document or the discussions that follow shall constitute a
solicitation to buy or subscribe for or an offer to sell any securities of
Albemarle
or
Rockwood
or
a
solicitation
of
any
vote
or
approval.
In
connection
with
the
proposed
transaction,
Albemarle
and
Rockwood
will
file
a joint proxy statement/prospectus and other relevant documents concerning the
proposed transaction with the Securities and Exchange Commission
(“SEC”), and Albemarle will file a Registration Statement on Form S-4 with the SEC. STOCKHOLDERS OF EACH COMPANY
AND OTHER INVESTORS ARE URGED TO READ THE REGISTRATION STATEMENT, JOINT PROXY
STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC
(INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) REGARDING THE PROPOSED
TRANSACTION WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION.
Stockholders
and
investors
will
be
able
to
obtain
a
free
copy
of
the
registration
statement
and
joint
proxy
statement/prospectus,
as
well
as
other
filings
containing
information
about
Albemarle
and
Rockwood,
without
charge,
at
the
SEC's
Internet
site
(http://www.sec.gov).
Copies
of
the
registration
statement
and
joint
proxy
statement/prospectus
and
the
filings
with
the
SEC
that
will
be
incorporated
by
reference
therein can also be obtained, without charge, by directing a request to Albemarle
Corporation, 451 Florida Street, Baton Rouge, Louisiana 70801, USA,
Attention: Investor Relations, Telephone: +1 (225) 388-7322, or to Rockwood Holdings, Inc., 100 Overlook Center, Princeton, New
Jersey 08540, USA, Attn: Investor Relations, Telephone +1 (609) 524-1101.
Participants in Solicitation
Albemarle,
Rockwood,
their
respective
directors
and
executive
officers
and
other
persons
may
be
deemed
to
be
participants
in
the
solicitation
of
proxies in respect of the proposed transaction. Information regarding
Albemarle’s directors and executive officers is available in its proxy
statement
filed
with
the
SEC
by
Albemarle
on
March
28,
2014,
and
information
regarding
Rockwood’s
directors
and
executive
officers
is
available in its proxy statement filed with the SEC by Rockwood on March 28, 2014.
Other information regarding the participants in the proxy solicitation and a
description of their direct and indirect interests, by security holdings or otherwise, will be contained in the joint proxy
statement/prospectus and other relevant materials to be filed with the SEC when
they become available. These documents can be obtained free of charge from
the sources indicated above. 23 |