Omnova sets new leverage target, taps debt for €28.5 million purchase

By Devika Patel

Knoxville, Tenn., Sept. 26 – Omnova Solutions Inc. used cash on hand and available liquidity from its senior revolving credit facility to fund its recently completed €28.5 million acquisition of Resiquímica, SA, a Portugal-based producer of resins and binders for the coatings and building and construction industries.

Omnova has also revised its leverage targets, seeking to keep net leverage in the range of 2.5x to 3x.

“This morning, we announced the acquisition of Resiquímica for €28.5 million, or approximately 7x EBITDA before cost synergies,” senior vice president, treasurer and chief financial officer Paul DeSantis said on the company’s third quarter ended Aug. 31 earnings conference call on Wednesday.

The company expects it will pay down the small amount of debt it took on for the acquisition out of next year’s cash flows.

“We took on a little bit of debt to buy Resiquímica, and it’s very likely we’ll pay that down out of our cash flows that we continue to generate,” DeSantis said.

The company has reevaluated its approach to capital deployment, revising its target leverage range.

“During the last several years, we’ve demonstrated our ability to sustain favorable cash flows and reduce our debt through our One Omnova [cost reduction] initiative,” president and chief executive officer Anne P. Noonan said on the call.

“This, and our continued successful execution against our specialization strategy, has led us to take a critical look at our capital allocation, including our targeted net leverage and our deployment of cash.

“As a result, going forward, we will look to target a new net leverage ratio in the 2.5x to 3x range,” she said.

Net debt to adjusted EBITDA improved to 3x from 3.3x at the end of last year's third quarter.

Cash and cash equivalents were $66.2 million as of Aug. 31, 2018, compared to $88 million as of Nov. 30, 2017.

Omnova is a Beachwood, Ohio-based innovator of performance-enhancing chemistries and surfaces for commercial, industrial and residential end uses.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.