- Builds upon momentum from Linxis, Peerless, and Gabler
acquisitions in 2022 with increased scale in food end market,
particularly within attractive pet food sector where the Food and
Performance Materials business is a leading provider of equipment
and systems
- Expands Hillenbrand's North American footprint and augments
processing capabilities of Advanced Process Solutions segment
across existing key end markets including durable plastics and
chemicals
- Expected to be accretive to Adjusted EPS within the first
full year and deliver ROIC in excess of cost of capital by year
five
BATESVILLE, Ind., May 24, 2023
/PRNewswire/ -- Hillenbrand, Inc. (NYSE: HI) announced today that
it has entered into a definitive agreement to acquire the Schenck
Process Food and Performance Materials ("FPM") business, a
portfolio company of Blackstone, for an enterprise value of
approximately $730 million. The
transaction is expected to close during Hillenbrand's fiscal fourth
quarter of 2023, subject to regulatory approvals and other
customary closing conditions.
Headquartered in Kansas City,
Missouri, FPM has over 1,300 global employees and sells to
customers in over 150 countries, with approximately 85% of revenues
generated in North America. FPM
specializes in the design, manufacturing, and service of feeding,
filtration, baking, and material handling technologies and systems
that are highly complementary to the equipment and solutions
currently offered in Hillenbrand's Advanced Process Solutions
segment. FPM is expected to generate calendar year 2023 revenue of
approximately $540 million and
approximately $68 million of EBITDA.
Upon closing, FPM will become part of the Advanced Process
Solutions segment.
"With this acquisition, we further strengthen our leadership
across the attractive, growing end markets of food, durable
plastics and chemicals, through strong brands that enhance the
breadth of our technology and service capabilities," said
Kim Ryan, President and CEO of
Hillenbrand. "By combining the applications and systems processing
expertise of our Advanced Process Solutions segment with FPM, we
will be positioned to offer greater value to our customers and
drive scale benefits across manufacturing, engineering, and
procurement. Over the last twelve months, we've divested our legacy
death care segment, and acquired high-quality industrial businesses
that serve large, attractive end markets that are underpinned by
long-term, secular growth trends. These actions have significantly
transformed Hillenbrand into a global leader in highly-engineered,
mission-critical industrial processing solutions. I am confident
this transaction further positions us to deliver compelling
long-term shareholder value."
Hillenbrand expects to use cash on hand and cash available under
its revolving credit facility to fund this acquisition. Following
the close of the transaction, Hillenbrand's projected net debt to
adjusted EBITDA ratio is expected to be approximately 3.2x, with a
plan to return to its communicated target net leverage range of
1.7x to 2.7x within 15 months after closing.
Value Creation Through Enhanced Strategic Positioning
- Advances Hillenbrand's capabilities as a global industrial
leader: Following the acquisitions of Linxis, Peerless, Gabler,
and Herbold, and the divestiture of its death care segment,
Batesville, Hillenbrand has
successfully transformed into a pure-play industrial leader in
highly-engineered, mission-critical processing solutions serving
large and growing end markets. Hillenbrand further expands its
capabilities and industrial growth platforms through the addition
of FPM.
- Captures secular trends: Immediately improves scale in
attractive food categories, including pet food, through FPM's
strong brands and technologies. Hillenbrand's illustrative combined
revenue including FPM would be approximately $3.3 billion, with over 25% from key growth
platforms of food and recycling, which are supported by long-term,
secular growth trends.
- Combines premier, high value brands with deep domain
expertise and comprehensive end-to-end systems capabilities:
FPM is a global leader in highly-engineered processing solutions
with a deep and proprietary technology portfolio that is highly
complementary to Hillenbrand's Advanced Process Solutions
segment.
- Creates tangible value through synergies with anticipated
ROIC above cost of capital: Hillenbrand has identified
~$20 million of expected cost synergy
opportunities across various operational initiatives. A dedicated
integration team with full support of Hillenbrand's senior
leadership will deploy the Hillendbrand Operating Model to drive
execution of the synergy plan. The transaction is expected to be
accretive to adjusted EPS in the first year after closing, with
double-digit accretion anticipated thereafter as synergies accrue.
Furthermore, the transaction is expected to provide an attractive,
double digit ROIC by year five, exceeding Hillenbrand's estimated
cost of capital.
Advisors
Skadden, Arps, Slate, Meagher & Flom LLP acted as legal
counsel and Credit Suisse Securities (USA) LLC acted as a financial advisor for
Hillenbrand.
Conference Call/Webcast
Hillenbrand management will hold a conference call and
simultaneous webcast to discuss the proposed acquisition of
FPM on Wednesday, May 24, 2023,
at 8:30 a.m. (ET). The live webcast,
including a slide presentation, will be available at
http://ir.hillenbrand.com under the "News & Events" tab and
will be archived on the company's investor relations website
through Wednesday, June 21, 2023.
To access the conference call, listeners in the United States and Canada may dial +1 (877) 407-8012, and
international callers may dial +1 (412) 902-1013. Please use
conference call ID number 13738990. A replay of the call will be
available until midnight ET,
Wednesday, June 7, 2023, by dialing
+1 (877) 660-6853 toll free in the United
States and Canada or +1
(201) 612-7415 internationally and using the conference ID number
13738990.
About Hillenbrand
Hillenbrand (NYSE: HI) is a global industrial company that
provides highly-engineered, mission-critical processing equipment
and solutions to customers in over 100 countries around the world.
Our portfolio is composed of leading industrial brands that serve
large, attractive end markets, including durable plastics, food,
and recycling. Guided by our Purpose — Shape What Matters For
Tomorrow™ — we pursue excellence, collaboration, and innovation to
consistently shape solutions that best serve our associates,
customers, communities, and other stakeholders. To learn more,
visit: www.Hillenbrand.com.
Disclosure Regarding Forward-Looking Statements
Throughout this release, we make a number of "forward-looking
statements," including statements regarding the proposed
acquisition (the "Proposed Transaction") by Hillenbrand, Inc.
("Hillenbrand" or the "Company") of the Schenck Process Food and
Performance Materials ("FPM") business, such as statements about
the timing and estimated synergies and other anticipated benefits
of the Proposed Transaction, that are within the meaning of Section
27A of the Securities Act of 1933, as amended, Section 21E of the
Securities Exchange Act of 1934, as amended, and the Private
Securities Litigation Reform Act of 1995, and that are intended to
be covered by the safe harbor provided under these sections. As the
words imply, these are statements about future sales, earnings,
cash flow, results of operations, uses of cash, financings, ability
to meet deleveraging goals, and other measures of financial
performance or potential future plans or events, strategies,
objectives, beliefs, prospects, assumptions, expectations, and
projected costs or savings or transactions of the Company that
might or might not happen in the future, as contrasted with
historical information. Forward-looking statements are based on
assumptions that we believe are reasonable, but by their very
nature are subject to a wide range of risks. If our assumptions
prove inaccurate or unknown risks and uncertainties materialize,
actual results could vary materially from Hillenbrand's
expectations and projections.
Words that could indicate that we are making forward-looking
statements include the following:
intend
|
believe
|
plan
|
expect
|
may
|
goal
|
would
|
project
|
position
|
become
|
pursue
|
estimate
|
will
|
forecast
|
continue
|
could
|
anticipate
|
remain
|
target
|
encourage
|
promise
|
improve
|
progress
|
potential
|
should
|
impact
|
|
This is not an exhaustive list, but is intended to give you an
idea of how we try to identify forward-looking statements. The
absence of any of these words, however, does not mean that the
statement is not forward-looking.
Here is the key point: Forward-looking statements
are not guarantees of future performance or events, and actual
results or events could differ materially from those set forth in
any forward-looking statements. Any number of factors, many of
which are beyond our control, could cause our performance to differ
significantly from what is described in the forward-looking
statements. These factors include, but are not limited to: global
market and economic conditions, including those related to the
financial markets; the impact of contagious diseases, such as the
outbreak of the novel strain of coronavirus ("COVID-19") and the
escalation thereof due to variant strains of the virus and the
societal, governmental, and individual responses thereto, including
supply chain disruptions, loss of contracts and/or customers,
erosion of some customers' credit quality, downgrades of the
Company's credit quality, closure or temporary interruption of the
Company's or its suppliers' manufacturing facilities, travel,
shipping and logistical disruptions, domestic and international
general economic conditions, such as inflation, exchange rates and
interest rates, loss of human capital or personnel, and general
economic calamities; risks related to the Russian Federation's invasion of Ukraine and resulting geopolitical instability
and uncertainty, which could have a negative impact on our ability
to sell to, ship products to, collect payments from, and support
customers in certain regions, in addition to the potential effect
of supply chain disruptions that could adversely affect
profitability; the risk of business disruptions associated with
information technology, cyber-attacks, or catastrophic losses
affecting infrastructure; the risk that regulatory approvals
required for the Proposed Transaction are not obtained or delay the
Proposed Transaction or cause the parties to abandon the Proposed
Transaction, or that obtaining any such regulatory approvals
results in the imposition of conditions, limitations, or
restrictions that adversely affect the Company or FPM; the risk
that other conditions to the completion of the Proposed Transaction
are not satisfied on a timely basis or at all; uncertainties as to
the timing of the Proposed Transaction and the risk that the
Proposed Transaction may not be completed in a timely manner or at
all; uncertainties as to the Company's access to available
financing for the Proposed Transaction on a timely basis and on
reasonable terms; the possibility of unanticipated costs or
liabilities associated with the Proposed Transaction; risks related
to diversion of management attention of FPM from its ongoing
business operations due to the Proposed Transaction or its
announcement or pendency; risks associated with contracts
containing consent and/or other provisions that may be triggered by
the Proposed Transaction; the impact of the announcement or
pendency of the Proposed Transaction on the Company's or FPM's
ability to retain and hire key personnel; the risk of litigation
relating to the Proposed Transaction; the possibility that the
integration of FPM with the Company's current operations will be
more costly or difficult than expected or may otherwise be
unsuccessful; negative effects of the Proposed Transaction
(including its announcement or pendency), the Linxis Group SAS
("Linxis") acquisition, or other acquisitions on the Company's
business, financial condition, results of operations and financial
performance (including the ability of the Company to maintain
relationships with its customers, suppliers and others with whom it
does business); the possibility that the anticipated benefits from
the Proposed Transaction, the Linxis acquisition, and other
acquisitions, including potential synergies and cost savings,
cannot be realized by the Company in full or at all or may take
longer to realize than expected, or the failure of the Company or
any acquired company to achieve its plans and objectives generally;
risks that the integrations of FPM, Linxis or other acquired
businesses disrupt current operations or pose potential
difficulties in employee retention or otherwise adversely affect
financial or operating results; increasing competition for highly
skilled and talented workers as well as labor shortages; our level
of international sales and operations; the impact of incurring
significant amounts of indebtedness and any inability of the
Company to respond to changes in its business or make future
desirable acquisitions; the ability of the Company to comply with
financial or other covenants in debt agreements; cyclical demand
for industrial capital goods; impairment charges to goodwill and
other identifiable intangible assets; competition in the industries
in which we operate, including on price; impacts of decreases in
demand or changes in technological advances, laws, or regulation on
the revenues that we derive from the plastics industry; our
reliance upon employees, agents, and business partners to comply
with laws in many countries and jurisdictions; increased costs,
poor quality, or unavailability of raw materials or certain
outsourced services and supply chain disruptions; the dependence of
our business units on relationships with several large customers
and providers; the impact to the Company's effective tax rate of
changes in the mix of earnings or tax laws and certain other
tax-related matters; exposure to tax uncertainties and audits;
involvement in claims, lawsuits and governmental proceedings
related to operations; uncertainty in the
United States political and regulatory environment or global
trade policy; adverse foreign currency fluctuations; labor
disruptions; and the effect of certain provisions of the Company's
governing documents and Indiana
law that could decrease the trading price of the Company's common
stock. Shareholders, potential investors, and other readers are
urged to consider these risks and uncertainties in evaluating
forward-looking statements and are cautioned not to place undue
reliance on the forward-looking statements. For a more in-depth
discussion of certain factors that could cause actual results to
differ from those contained in forward-looking statements, see the
discussions under the heading "Risk Factors" in Part I, Item 1A of
Hillenbrand's Form 10-K for the year ended September 30, 2022, filed with the Securities and
Exchange Commission ("SEC") on November 16,
2022, and in Part II, Item 1A of Hillenbrand's Form 10-Q for
the quarter ended March 31, 2023,
filed with the SEC on May 8, 2023. The forward-looking
information in this release speaks only as of the date hereof, and
we assume no obligation to update or revise any forward-looking
information.
Note Regarding Certain Financial Information
The ratio of net debt to pro forma adjusted EBITDA is a key
financial measure that is used by management to assess
Hillenbrand's borrowing capacity (and is calculated as the ratio of
total debt less cash and cash equivalents to the trailing twelve
months pro forma adjusted EBITDA). Hillenbrand's illustrative
combined revenue including FPM is the sum of FPM's expected
calendar year 2023 revenue, based on unaudited prospective
financial information prepared and provided to Hillenbrand by FPM,
and Hillenbrand fiscal year 2022 net revenue pro forma for the
acquisitions of Linxis, Herbold, Gabler, and Peerless, and the
divestiture of Batesville. The
forward-looking ratio of net debt to pro forma adjusted EBITDA and
Hillenbrand's illustrative combined revenue including FPM exclude
potential charges or gains that may be recorded during the fiscal
year, including, in the case of such ratio, with respect to
business acquisition, disposition, and integration costs and
restructuring and restructuring-related charges. In addition,
FPM's financial statements are prepared in accordance with
International Financial Reporting Standards ("IFRS"), which differs
in certain material respects from US generally accepted accounting
principles ("US GAAP"). For instance, when compared to US
GAAP, IFRS (i) allows for the capitalization and amortization of
certain research and development costs rather than recognizing an
expense as incurred, and (ii) treats all leases as financing leases
rather than operating or financing, each of which may impact EBITDA
as presented thereunder. FPM defines EBITDA as net income
before interest, income tax, depreciation and amortization (in each
case determined in accordance with IFRS). Thus, as permitted by
Regulation G, Hillenbrand does not provide quantitative
reconciliations of such forward-looking non-GAAP financial
information to the comparable GAAP measure, because the impact and
timing of these potential charges or gains is inherently uncertain
and difficult to predict and is unavailable without unreasonable
efforts. Such items could have a substantial impact on GAAP
measures of Hillenbrand's financial performance. In addition, the
Company believes such reconciliations would imply a degree of
precision and certainty that could be confusing to investors.
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SOURCE Hillenbrand, Inc.