- Acquiring industry-leading, premium electronic materials
portfolio, significantly increasing access to the high-growth
semiconductor market
- Meaningfully increases scale and total addressable market in
the semiconductor space, while providing greater product and
geographic diversification and new, above-market growth
opportunities
- Accelerates transformation strategy to become a preeminent
provider of advanced material solutions to high-tech markets with
greater alignment to global megatrends
- Offers compelling growth and free cash flow characteristics;
expected to be immediately accretive to EBITDA margin and adjusted
EPS
Materion Corporation (NYSE: MTRN), a world leader in high
performing advanced materials, today announced that it has entered
into an agreement to acquire H.C. Starck Solutions’
industry-leading, electronic materials business, located in Newton,
Massachusetts (HCS-Electronic Materials). HCS-Electronic Materials
utilizes proprietary technology and extensive material science
know-how to deliver tantalum- and niobium-based premium products
and services for the semiconductor, industrial, and aerospace &
defense markets.
HCS-Electronic Materials is a leading provider of high-quality,
high-purity tantalum sputtering targets, important in the
manufacture of today’s leading-edge semiconductor chips. Building
on Materion’s existing portfolio of electronic materials and
premium thin film target solutions, the acquisition will
significantly enhance the company’s position as a leading supplier
to the high-growth semiconductor industry. HCS-Electronic Materials
adds advanced manufacturing processes and technical capabilities
necessary to meet the rapidly evolving technology challenges
involved in delivering today’s most advanced chip architectures and
important applications for the industrial and aerospace &
defense markets.
HCS-Electronic Materials is expected to generate revenue of
approximately $145 million in 2021, adding over 19% in Value-Added
Sales, and adjusted EBITDA of approximately $29 million,
representing an adjusted EBITDA margin of approximately 20%. The
addition is expected to be immediately accretive to Materion’s
adjusted EBITDA margin by 100 basis points. The purchase price of
$380 million reflects an approximate 13x estimated 2021 adjusted
EBITDA multiple before synergies, and an approximate 10x estimated
adjusted EBITDA multiple including projected run-rate synergies.
Following closing of the transaction, HCS-Electronic Materials will
be part of Materion’s Advanced Materials segment.
“HCS-Electronic Materials is a highly strategic and
transformative acquisition that builds on our strong position in
the semiconductor industry and supports our goals of driving above
market growth, expanding margins, and delivering consistent
double-digit EPS growth,” Materion President & CEO Jugal
Vijayvargiya said. “HCS-Electronic Materials’ leading-edge
technology extends our global reach and expands our product
offering to leading semiconductor chip manufacturers, as well as
important industrial and aerospace & defense customers. We are
excited about the opportunities ahead and look forward to welcoming
HCS-Electronic Materials’ 140 highly-skilled team members to
Materion.”
The combination presents significant compelling strategic and
financial benefits:
- Increases Access to High-Growth Semiconductor Market and
Alignment with Megatrends: Deepens alignment with leading
global semiconductor manufacturers and further enhances our
position to benefit from key megatrends, specifically proliferation
of smart devices, high-speed connectivity (5G), autonomous driving,
artificial intelligence, and cloud computing
- Creates Significant End Market Scale and Increases Total
Addressable Market: Expands Materion’s presence in the
semiconductor industry, increasing sales contribution by more than
40%, provides access to new higher-value chip applications, and
meaningfully increases the total addressable market opportunity in
the space
- Broadens Portfolio and Expands Reach: Adds new advanced
materials to the portfolio, increases sales contribution outside
the U.S., creates geographic advantage aligned with evolving
semiconductor manufacturing trends, and strengthens established
positions in industrial and aerospace & defense markets
- Adds Proprietary Process Technology and Key Talent: Adds
a center of excellence with proprietary process technologies that
yield highly differentiated solutions and brings deep technical
expertise and seasoned talent
- Enhances Financial Profile: The transaction is expected
to be immediately accretive to Materion’s adjusted EPS and adjusted
EBITDA margins by 100 basis points, and is expected to increase
annual value-added sales by over 19%; in addition, the company
expects synergies to meaningfully contribute to EBITDA; targeting
approximately $10M by 2026
“The addition of HCS-Electronic Materials significantly enhances
Materion’s portfolio of advanced materials solutions and is a great
example of how we are leveraging our strong financial position to
acquire proven businesses that align with our growth strategy. We
remain focused on deepening and broadening our technical
capabilities, adding greater diversification, and increasing our
access to attractive higher-growth and higher-margin business
opportunities,” Vijayvargiya said.
The acquisition of HCS-Electronic Materials builds on Materion’s
acquisition of Optics Balzers in 2020, which expanded the company’s
global position in optical thin film coatings, furthering its
transformation to a leading advanced materials supplier.
Transaction Terms and Financing
The acquisition of HCS-Electronic
Materials is structured as an equity purchase.
Materion expects to finance the transaction utilizing a new term
loan along with borrowings from its revolving credit agreement. Pro
forma net debt to adjusted EBITDA is expected to be approximately
2.9x at the time of close, within the company’s stated target
leverage range of 1.5x to 3.0x. Materion expects to generate strong
cash flow and deploy it towards deleveraging to the middle of the
range within 24 months post close.
The transaction is expected to close in the fourth quarter of
2021, subject to customary closing conditions, including regulatory
approval.
J.P. Morgan is serving as exclusive financial advisor and Jones
Day as legal counsel to Materion.
Conference Call and Webcast
Information
Materion Corporation will hold a conference call today,
September 20th at 11 a.m. Eastern Time to discuss the
HCS-Electronic Materials acquisition. Investors who wish to
participate in the call should dial 1-877-407-0788 approximately 10
minutes before the call begins. Callers outside the U.S. can dial
(201) 689-8565. A replay of the call will be available until
October 4th, 2021 by dialing (877) 481-4010 or (919) 882-2331;
please reference replay ID number 42893. The call will also be
archived on the Company’s website.
About Materion
Materion Corporation is headquartered in Mayfield Heights, Ohio.
Materion, through its wholly owned subsidiaries, supplies highly
engineered advanced enabling materials to global markets. Products
include precious and non-precious specialty metals, inorganic
chemicals and powders, specialty coatings, specialty engineered
beryllium alloys, beryllium and beryllium composites, and
engineered clad and plated metal systems.
About H.C. Starck
Solutions
Privately held H.C. Starck Solutions is a leading global
supplier of refractory metal powders and, with core competencies in
tantalum and niobium, supplies growing industries such as
semiconductor, industrial, and aerospace & defense. The
company, owned by Advent International and The Carlyle Group,
operates six production sites across North America, Europe, and
China and employs over 470 people.
FORWARD-LOOKING STATEMENTS
Portions of the narrative set forth in this document that are
not statements of historical or current facts are forward-looking
statements. Our actual future performance may materially differ
from that contemplated by the forward-looking statements as a
result of a variety of factors. These factors include, in addition
to those mentioned elsewhere herein: our ability to successfully
consummate the acquisition of HCS-Electronic Materials; our ability
to achieve the strategic and other objectives related to the
proposed acquisition of HCS-Electronic Materials, including any
expected synergies; our ability to successfully integrate the
HCS-Electronic Materials business and other such acquisitions and
achieve the expected results of the acquisition, the ultimate
impact of the COVID-19 pandemic on our business, results of
operations, financial condition, and liquidity; the global economy,
including the impact of tariffs and trade agreements; the condition
of the markets which we serve, whether defined geographically or by
segment; changes in product mix and the financial condition of
customers; our success in developing and introducing new products
and new product ramp-up rates; our success in passing through the
costs of raw materials to customers or otherwise mitigating
fluctuating prices for those materials, including the impact of
fluctuating prices on inventory values; our success implementing
our strategic plans and the timely and successful completion and
start-up of any capital projects; other financial and economic
factors, including the cost and availability of raw materials (both
base and precious metals), physical inventory valuations, metal
financing fees, tax rates, exchange rates, interest rates, pension
costs and required cash contributions and other employee benefit
costs, energy costs, regulatory compliance costs, the cost and
availability of insurance, credit availability, and the impact of
the Materion’s stock price on the cost of incentive compensation
plans; the uncertainties related to the impact of war, terrorist
activities, and acts of God; changes in government regulatory
requirements and the enactment of new legislation that impacts our
obligations and operations; the conclusion of pending litigation
matters in accordance with our expectation that there will be no
material adverse effects; the disruptions on operations from, and
other effects of, catastrophic and other extraordinary events
including the COVID-19 pandemic; and the risk factors set forth in
Part 1, Item 1A of our 2020 Annual Report on Form 10-K.
Materion Corporation is headquartered in Mayfield Heights, Ohio.
Materion, through its wholly owned subsidiaries, supplies highly
engineered advanced enabling materials to global markets. Products
include precious and non-precious specialty metals, inorganic
chemicals and powders, specialty coatings, specialty engineered
beryllium alloys, beryllium and beryllium composites, and
engineered clad and plated metal systems.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210920005444/en/
Investor Contact: Andrew Vento
(216) 383-4098 andrew.vento@materion.com Media Contact: Shannon Bennett (216) 383-4094
shannon.bennett@materion.com https://materion.com Mayfield
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