Koppers Inc., a wholly-owned subsidiary of Koppers Holdings Inc. (NYSE: KOP), today announced that it has completed the acquisition of the Wood Preservation and Railroad Services businesses (collectively, the "Acquired Businesses") of Osmose Holdings, Inc. (Osmose).
Barclays Capital Inc. acted as financial advisor to Koppers in regard to the transaction, and K&L Gates LLP acted as legal counsel to the company. Committed financing has been provided by PNC Bank, National Association.
The new financing, which was completed concurrent with the closing of the acquisition, includes a $300 million Term Loan A with a five-year amortization period and a $500 million revolving credit facility that has been increased from the previous $350 million facility. Initial average borrowing rates under the new facilities are expected to be approximately 3.25%.
"Acquiring the two Osmose businesses is an important step in our long-term growth strategy for Koppers. The businesses fit well within our core competencies, expand both our chemicals offering and our existing railroad and utilities products and services platform, and provide additional growth opportunities as we gain leading market positions in strategic end-markets around the world," said Walt Turner, President and CEO of Koppers. "The synergies from the acquisition are expected to be at least $12 million, and we anticipate that the annual run rate will be realizable by the end of 2015. I am pleased with the opportunities that we have identified throughout the integration process, and I look forward to achieving the benefits that we will provide to our shareholders from the acquisition."
The Wood Preservation business, now known as Koppers Performance Chemicals, is the global leader in developing, manufacturing, and marketing wood preservation chemicals and wood treatment technologies. The business has operations and sales in North America, South America, Europe, and Australasia, and accounted for approximately $350 million of the revenue for the Acquired Businesses in 2013. This business serves a diverse range of end-markets including infrastructure, residential and commercial construction, and agriculture.
The Railroad Services business, now known as Koppers Railroad Structures, is a leading provider of railroad infrastructure services, including bridge inspection, engineering, maintenance and repair, and construction services for the Class I and shortline railroads in North America. The business accounted for approximately $40 million of revenue in 2013.
The aggregate cash purchase price for the Acquired Businesses was $494.1 million, which includes $27.3 million of cash in foreign countries as well as the value of an anticipated 338(h)(10) tax election that is expected to provide cash tax savings of approximately $7 million annually over the next 15 years. Koppers is financing the purchase through new and existing bank debt, including a new term loan and an increase to the company's existing revolving credit facility. Revenues for the Acquired Businesses in 2013 were approximately $390 million. Through June 30, 2014, revenues for the Acquired Businesses were up by 6% over the first six months of 2013. The synergies from the acquisition are expected to be at least $12 million, and the company anticipates the annual run rate will be realizable by the end of 2015. The acquisition is expected to add more than $400 million of sales at EBITDA margins that are expected to be above the company's 2015 target level of 12%.