OM Group to sell downstream business to JV for $425 million; $50 million share repurchase OK'd

By Lisa Kerner

Charlotte, N.C., Jan. 23 - OM Group chairman and chief executive officer Joe Scaminace called the company's announcement that it will sell its cobalt refinery assets in Kokkola, Finland, to a joint venture a "watershed moment" in the history of OM Group.

Scaminace made his comments during a conference call to discuss the proposed transaction in which OM Group will exit its Advanced Materials business through a sale to the joint venture held by Freeport-McMoRan Copper & Gold Inc., Lundin Mining Corp. and La Generale des Carrieres et des Mines (Gecamines) for total potential consideration of up to $435 million.

Under the terms of agreement, OM Group will receive initial cash consideration of $325 million and potential future payments of up to an additional $110 million based on the business achieving certain revenue targets over a period of three years.

Also, in connection with the sale, OM Group agreed to exit its upstream business by transferring its equity interests in its DRC-based joint venture known as GTL to its joint venture partners.

"This is a major step in realizing our vision to move away from commodity businesses to higher value-added businesses," said Scaminace.

The sale is expected to close before the end of April 2013.

Following the close of the sale, OM Group expects to have total cash on hand of more than $500 million.

Cash from the sale, as well as cash on hand, will be used to repay debt, said chief financial officer Chris Hix. While Hix would not say how much debt would be repaid, he called the amount "substantial."

At the end of December, OM Group had debt of $467 million. The company has an existing credit agreement that provides $200 million of revolver capacity, ensuring adequate liquidity.

"Going forward, we will have a fortress balance sheet with a financial capacity and flexibility to execute all facets of our strategy, including organic growth, synergistic acquisitions and share repurchases under the newly announced program," Hix said.

Share repurchase authorized

OM Group also announced that its board of directors has authorized the repurchase of up to $50 million, or about 7%, of its current outstanding common shares.

Purchases may be made through open market repurchases, negotiated block transactions, accelerated share repurchases or open-market solicitations for shares, some of which may be effected through 10b5-1 plans.

Any repurchases would be funded from cash on hand or borrowings under the company's credit facilities.

The timing of repurchases will depend on several factors including market and business conditions, and the repurchases may be discontinued at any time, a company news release said.

OM Group is a Cleveland-based global services provider of specialty chemicals, advanced materials, electrochemical energy storage and technologies.

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