Owner of Coperion announces acquisition of Milacron

Hillenbrand, the parent company of Coperion, a compounding and extrusion company, has acquired Milacron Holdings Corp. The sale comes on the heels of recent news that Milacron had sold its Uniloy blow molding business to two private-equity firms.

In a July 12 press release, Hillenbrand and Milacron announced that Hillenbrand would acquire Milacron in a cash and stock transaction valued at approximately $2 billion, including net debt of approximately $686 million. The transaction is expected to close in the first quarter of next year. In the immediate aftermath of the announcement, Milacron’s stock prices soared, while Hillenbrand’s fell. Milacron has been based in Blue Ash, Ohio, while Hillenbrand has its headquarters in Batesville, Ind.

In the agreement, which has been unanimously approved by the boards of directors of both companies, Milacron stockholders will receive $11.80 in cash and a fixed exchange ratio of 0.1612 share of Hillenbrand common stock for each share of Milacron common stock they own. Based on Hillenbrand’s closing stock price on July 11, the last trading day prior to the announcement, Milacron stockholders would receive $18.07 per share, representing a premium of approximately 34 percent to Milacron’s closing stock price on July 11 and a premium of approximately 38 percent to Milacron’s 30-day volume-weighted average price as of the July 11 close. Upon closing, Hillenbrand shareholders will own approximately 84 percent of the combined company, and Milacron stockholders will own approximately 16 percent. Hillenbrand intends to fund the cash portion of the transaction through debt financing and has secured a committed bridge financing facility led by J.P. Morgan.

Milacron manufactures, distributes, and services engineered and customized systems in the approximately $30 billion plastics technology and processing industry; it also provides fluid technologies and processing systems. It operates in three segments: Melt Delivery and Control Systems, which designs and manufactures advanced, highly engineered hot-runner and process-control systems, mold bases and components; Advanced Plastics Processing Technologies, which designs and manufactures plastics processing equipment and systems, including injection molding, extrusion and auxiliary systems; and Fluid Technologies, which manufactures products that are used in a variety of metalworking processes.

With the agreement, Hillenbrand will add new strategic businesses in hot-runner systems and injection molding to its portfolio through Milacron’s leading brands, including Mold-Masters and Milacron injection molding. Together, the combined company will have increased scale and product diversification through complementary technologies across the plastics value chain, including plastic base resins production, compounding, recycling and the manufacture of extruded and injection-molded products.

Globally, Coperion, based in Stuttgart, Germany, has more than 15,000 installed compounding machines and extruders, more than 10,000 installed bulk materials-handling systems and more than 20,000 installed feeders and pneumatic conveying systems. It has 2,500 employees and 30 location facilities, including 10 manufacturing sites.

Hillenbrand said the deal will:

• Enhance growth opportunities with leading brands and new technologies. The combined company will be able to leverage its technologies and broaden product offerings to reach additional customer segments. Milacron’s technologies will enable Hillenbrand to offer additional injection molding, extrusion and hot-runner systems. The combined company will have an expanded reach in end markets, including the construction, consumer packaging, automotive, electronics, medical and recycling fields.
• Add complementary businesses, and increase the scale and diversity of Hillenbrand’s portfolio. With Milacron, Hillenbrand will add new complementary businesses to its portfolio, including leading positions in plastics technology and processing. With broader global scale and a presence in more than 50 countries, the combined company will be better positioned to capitalize on emerging trends across the plastics value chain.
• Create and drive efficiencies. Milacron will benefit from the Hillenbrand Operating Model (HOM), and Hillenbrand expects to leverage Milacron’s global shared services center to drive operational efficiency. Within three years of its completion, the transaction is expected to generate annualized, run-rate cost synergies of approximately $50 million, primarily through reducing public company costs, realizing operating efficiencies, and capturing direct and indirect spending opportunities. The transaction also is expected to generate revenue synergies, driven by opportunities to cross-sell extruder and materials-handling equipment, and to leverage the companies’ combined service footprint to further penetrate the product aftermarket.
• Deliver strong financial benefits. The transaction is expected to deliver double-digit adjusted earnings-per-share accretion in the first year following its close and will immediately improve the margin of adjusted earnings before interest, tax, depreciation and amoritization. Hillenbrand anticipates further margin improvement as the combined company leverages scale and realizes cost savings. Hillenbrand expects to generate free cash flow greater than $325 million by 2021, retain its investment-grade credit rating, and deploy cash flow aligned with its capital allocation strategy, including maintaining its quarterly dividend. Hillenbrand expects to refinance Milacron’s outstanding debt at close and reduce net leverage to below 2.75 times within 12 months of the acquisition.

Joe Raver, president and CEO of Hillenbrand, said, “This transaction meaningfully transforms our portfolio and product offering by adding Milacron’s leading technology solutions and sizable installed customer base to help us drive long-term growth. Milacron aligns with our profitable growth strategy and acquisition framework, and we expect the additional capabilities from its high-performing segments to accelerate free cash-flow generation and improve margins across the business. I have great respect for Milacron’s talented employees and look forward to welcoming them to Hillenbrand as we embark on this next step in our strategy and create enhanced value for our shareholders, customers, employees and communities.”

Tom Goeke, Milacron’s CEO said, “After careful review, our board unanimously concluded that a combination with Hillenbrand represents a unique opportunity to provide Milacron stockholders with significant and immediate value and the ability to benefit from the upside potential of the combined company. Hillenbrand has a tremendous track record of growing and driving value across its portfolio of highly engineered products. Together, we will continue to provide customers with breakthrough products and customized systems. This combination is a result of the Milacron team’s tremendous progress in enhancing our position as a global leader in plastics technology and processing. I am confident we have found a strong partner in Hillenbrand and look forward to a seamless transition.”