Milacron Holdings Corp. (Cincinnati, OH) and industrial equipment company Hillenbrand Inc. (Batesville, IN) today announced that they have entered into a definitive agreement under which Hillenbrand will acquire Milacron in a cash and stock transaction valued at approximately $2 billion, including net debt of approximately $686 million as of March 31, 2019.
The transaction is expected to close in the first calendar quarter of 2020, subject to customary closing conditions and regulatory approvals.
Under the terms of the agreement, which was 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 shares of Hillenbrand common stock for each share of Milacron common stock they own. Based on Hillenbrand’s closing stock price on July 11, 2019, the last trading day prior to the announcement, the implied cash and stock consideration to be received by Milacron stockholders is $18.07 per share, representing a premium of approximately 34% to Milacron’s closing stock price on July 11, 2019, and a premium of approximately 38% to Milacron’s 30-day volume-weighted average price as of the close on July 11, 2019. Upon closing, Hillenbrand shareholders will own approximately 84% of the combined company, and Milacron stockholders will own approximately 16%.
Following today’s announcement, shares of Milacron stock soared 21% toward a nine-month high in premarket trading, reported MarketWatch.
“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,” said Milacron CEO Tom Goeke in a prepared statement. “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,” said Goeke.
A storied U.S. manufacturer, Milacron has its roots in a screw shop founded in 1860. The company filed for Chapter 11 bankruptcy protection of its businesses in 2009 and has had some rough quarters recently.
This transaction represents a pivotal step in Hillenbrand’s vision to become a world-class global diversified industrial company by adding new strategic businesses in hot runner systems and injection molding to Hillenbrand’s portfolio through Milacron’s leading brands, including Mold-Masters and Milacron injection molding, said Hillebrand.
Milacron recently sold blowmolding machine and mold manufacturer Uniloy Inc. to private equity firms Osgood Capital and Cyprium Investment Partners. On July 3, Uniloy announced that it had completed the purchase of the U.S. and European operations from Milacron, with operations in Mexico and India expected to follow suit in Q3 of this year.
The combination of Milacron and Hillenbrand will have increased scale and meaningful product diversification, enhancing its ability to serve customers through complementary technologies across the plastics value chain, including plastic base resins production, compounding, processing both extruded and injection-molded products, and recycling, said today’s press release.
Hillenbrand touted the strategic and financial benefits of the transaction, as follows:
- Enhanced growth opportunities with leading brands and new technologies. The combined company will be able to leverage its industry-leading technologies and broadened product offerings to reach additional customer segments. Milacron’s technologies will enable Hillenbrand to offer solutions across key conversion steps in plastics processing including injection molding, extrusion and hot runner systems. Additionally, the combined company will have an expanded reach in attractive end markets, including construction, consumer packaging, automotive, electronics, medical and recycling.
- Complementary businesses with increased scale and diversification. 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 well positioned to capitalize on emerging trends across the plastics value chain.
- Creation of efficiencies with significant cost synergies. Milacron will benefit from the Hillenbrand Operating Model, and Hillenbrand expects to leverage Milacron’s global shared services center to drive operational efficiency. The transaction is expected to generate annualized, run-rate cost synergies of approximately $50 million within three years following close, primarily through reducing public company costs, realizing operating efficiencies, and capturing direct and indirect spend opportunities. The transaction is also expected to generate revenue synergies, driven by opportunities to cross-sell extruder and material handling equipment, and to leverage the combined service footprint to further penetrate the product aftermarket. These efficiencies will be driven across the combined organization through utilizing the HOM, while maintaining a commitment to serving customers with excellence and innovation.
- Strong financial benefits. The transaction is expected to deliver double-digit adjusted EPS accretion in the first year following close and will immediately improve adjusted EBITDA margin. Hillenbrand anticipates further margin improvement as the combined company leverages scale and realizes cost savings. Hillenbrand expects to generate approximately $3 billion in revenues and free cash flow greater than $325 million annually 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 2.75x within 12 months post-close.