Target Information

Elementis plc has announced its agreement to acquire SRLH Holdings, Inc., also known as SummitReheis, from One Rock Capital Partners, LLC, for an enterprise value of US$360 million. This acquisition significantly enhances Elementis' presence in the personal care sector by integrating SummitReheis, a high-margin specialty chemicals provider known for its innovative active ingredients used in personal care, pharmaceuticals, and dental products. For the fiscal year ending December 31, 2016, SummitReheis is projected to report revenues of US$134 million with an underlying EBITDA of approximately US$28 million. The acquisition value equates to about 11.8 times the estimated EBITDA for 2016, factoring in potential cost synergies.

SummitReheis is particularly recognized for its leading position in the active ingredients market for anti-perspirants, comprising more than 60% of its sales. It has established strong relationships with major consumer product companies across various global markets, including the Americas, Europe, and Asia. This strategic alignment positions SummitReheis to capitalize on its expertise in the highly competitive and growing personal care market.

Industry Overview

The personal care industry, particularly in the United States, is undergoing significant transformation driven by evolving consumer preferences and demographic trends. In this sector, anti-perspirants represent a highly attractive and fast-growing market, anticipated to reach a value of US$13 billion. Enhanced consumer demand for premium, high-efficiency products in established markets coincides with rising disposable incomes and changing lifestyle habits in developing regions.

Emerging markets, notably in Latin America, India, and Southeast Asia, are increasingly adopting anti-perspirant products, spurred by shifts in cultural practices and growing awareness of personal care options. SummitReheis' strategic footprint primarily covers North America and Europe, where approximately 70% of its sales originate, allowing the company to leverage these regions' market potential while exploring growth in newer markets.

The combination of SummitReheis and Elementis is seen as synergistic, as their complementary products and geographic reach offer substantial cross-selling opportunities. Additionally, elements of the growing preference for natural and technologically advanced personal care products position the combined entity well against competitors in a rapidly evolving landscape.

The Rationale Behind the Deal

This acquisition aligns with Elementis’ broader strategy to capitalize on growth opportunities within the personal care sector. By merging its existing product suite with SummitReheis's specialized offerings, Elementis aims to create a compelling multimillion-dollar personal care segment. This integration will not only expand Elementis' product portfolio but also enhance operational capabilities and market positioning.

The acquisition is expected to yield significant earnings accretion, with Elementis projecting immediate benefits in adjusted earnings per share within the current financial year. Furthermore, Elementis anticipates strong free cash flow enhancement as the combined business explores new avenues for growth, particularly in the anti-perspirants market.

Information About the Investor

Elementis plc is a notable player in the specialty chemicals sector, focusing on delivering innovative solutions across various industries, including personal care, pharmaceuticals, and coatings. With a rich heritage and deep expertise in rheology modifiers and other specialized products, Elementis is well-positioned to harness the growth opportunities that arise from the Union with SummitReheis. The company's strategic investments and a solid operational foundation have enabled it to sustain competitive advantages while addressing the evolving needs of global markets.

The acquisition financing is anticipated through a combination of existing cash reserves and new debt facilities totaling US$475 million. This financial strategy enables Elementis to integrate SummitReheis efficiently while maintaining prudent financial practices moving forward.

View of Dealert

The acquisition of SummitReheis by Elementis is strategically astute, presenting numerous potential benefits that could enhance long-term shareholder value. As global demand for personal care products grows, especially within the anti-perspirant sector, Elementis positions itself to comprehensively address this market's needs through enhanced scale and product diversification.

The expected synergies resulting from the merger are promising, particularly in light of the complementary product lines and established customer relationships of both companies. The potential for cross-selling and expanded market reach, especially in emerging markets, could yield substantial growth opportunities that justify the acquisition's valuation.

Moreover, with anticipated immediate adjusted earnings per share accretion and enhanced free cash flow, stakeholders can have confidence in Elementis’ ability to maximize returns on this investment. The prudent financing approach further underscores Elementis’ commitment to maintaining a robust balance sheet while pursuing growth prospects.

In summary, the merger is poised to be a sound investment, reinforcing Elementis’ foothold in the personal care industry and supporting its long-term growth objectives in a dynamic market environment.

View Original Article