Highly Complementary Transaction
majority of which will be realized within two years
of closing. These synergies are expected to be
driven primarily by supply efficiencies and cost
reductions. Additional value creation is expected
through cross-selling opportunities and the ability
to provide an expanded array of products and
solutions for customers.
Combining Quaker Chemical’s and Houghton
International’s product solutions and service
offerings will allow the new company to better
serve customers in the automotive, aerospace,
heavy equipment, metals, mining, machinery,
marine, offshore, and container industries.
The business will have one of the world’s most
expansive metalworking platforms comprised of
specialty products that include removal fluids,
forming fluids, protecting fluids, heat treating
fluids, industrial lubricants and greases.
Post-transaction, the combined company expects
to continue to maintain its dividend and use its
strong cash flow generation to quickly reduce
debt, improving its pro forma net debt to adjusted
EBITDA ratio from approximately 3.7 times at close
to approximately 2.5 times within two years after
close.
The expanded portfolio is expected to generate
significant cross-selling opportunities and allow
further expansion into growth markets that
include India, Korea, Japan, and Mexico.
By combining resources, the new company will
increase the breadth of its innovative technology,
accelerate its product development initiatives
and time to market, and diversify its long-term
R&D pipeline. The company’s customer-intimate
business model will be further strengthened with
an expanded chemical management offering. The
enhanced portfolio, industry-expert associates and
applications expertise will enable the combined
company to bring additional value to its customers’
overall performance and operations.
Financing, Governance And Leadership
Quaker Chemical has secured $1.15 billion in
committed financing from Bank of America Merrill
Lynch and Deutsche Bank Securities Inc. to support
the transaction, which includes $200 million of
additional liquidity for future needs. The company
estimates that the annual ongoing interest costs
of the financing will be in the 3 percent range at
today’s interest rates.
The completion of the transaction, which is
expected by the end of 2017 or early 2018,
is subject to customary closing conditions,
including regulatory approvals and approval by
Quaker Chemical shareholders. The companies
will continue to operate independently until the
transaction is completed.
Value Creation For Shareholders
For 2016, Quaker Chemical had revenue of $747
million, $107 million of adjusted EBITDA, and
$22 million of net cash. During the same period,
Houghton International had revenue of $767
million, $120 million of adjusted EBITDA, and
$690 million of net debt. After the close of the
transaction, shares of the combined company
will continue to be listed on the New York Stock
Exchange. The company anticipates achieving
cost synergies of approximately $45 million, the
Following closing of the transaction, the new
company is expected to have a 12-member board
of directors, consisting of 9 directors from Quaker
Chemical and 3 directors to be nominated by the
Hinduja Group. Michael F. Barry will continue as
Chairman and Chief Executive Officer of the new
business, and the structure of the company will
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TN MAY 2017