Hillenbrand to acquire Milacron Holdings; deal worth US$2 bn

Hillenbrand Milacron Holdings logo

In what is termed to be a “deal of the year”, Hillenbrand Inc., which owns compounding extruder maker Coperion and auxiliary equipment firms K-Tron and Rotex, is to acquire compatriot machinery firm Milacron Holdings Corp. in a cash and stock transaction valued at US$2 billion, including net debt of approximately US$686 million as of March 31, 2019.

This also comes hot on the heels of Milacron’s recent completion of the sale of its Uniloy blow moulding machinery business to two private equity firms — Osgood Capital Group LLC and Cyprium Investment Partners LLC — for around US$52 million.

Under the terms of the agreement of the Milacron acquisition, which has been unanimously approved by the Boards of Directors of both companies, Milacron stockholders will receive US$11.80 in cash and a fixed exchange ratio of 0.1612 shares of Hillenbrand common stock for each share of Milacron common stock they own.

Milacron manufactures, distributes, and services engineered and customised systems in the approximately US$30 billion plastics technology and processing industry, as well as fluid technologies and processing systems.

Milacron operates in three segments: Melt Delivery & Control Systems, which designs and manufactures highly engineered, technically advanced hot runner and process control systems, mould bases, and components; Advanced Plastics Processing Technologies, which designs and manufactures plastics processing equipment and systems, including injection moulding, extrusion, and auxiliary systems; and Fluid Technologies, which manufactures products that are used in a variety of metalworking processes.

This transaction is said to represent a pivotal step in Hillenbrand’s vision to become a world-class global diversified industrial company by adding new strategic businesses in hot runner systems and injection moulding to Hillenbrand’s portfolio through Milacron’s brands, including Mold-Masters and Milacron injection moulding.

The combined company is expected to generate sales of nearly US$3 billion a year and free cash flow of more than US$325 million by 2021. Milacron had sales of US$1.1 billion in 2018. It employs approximately 5,800 people. Hillenbrand is a US$1.8 billion company with a global workforce of roughly 6,500. Both companies are traded on the New York Stock Exchange

Joe Raver, President/CEO of Hillenbrand, said, “This transaction meaningfully transforms our portfolio and product offering by adding Milacron’s leading technology solutions and sizable installed customer base to help us drive long-term growth. Milacron aligns with our profitable growth strategy and acquisition framework and we expect the additional capabilities from its high-performing segments to accelerate free cash flow generation and improve margins across the business.”

Milacron’s technologies will enable Hillenbrand to offer solutions across key conversion steps in plastics processing including injection moulding, extrusion, and hot runner systems. Additionally, the combined company will have an expanded reach in attractive end markets, including construction, consumer packaging, automotive, electronics, medical, and recycling.

With Milacron, Hillenbrand will add new complementary businesses to its portfolio, including leading positions in plastics technology and processing. With broader global scale and a presence in more than 50 countries, the combined company will be well positioned to capitalise on emerging trends across the plastics value chain.

The transaction is expected to generate annualised, run-rate cost synergies of approximately US$50 million within three years. The transaction is also expected to generate revenue synergies, driven by opportunities to cross-sell extruder and material handling equipment, and to leverage the combined service footprint to further penetrate the product aftermarket.

The transaction is expected to deliver double-digit Adjusted EPS accretion in the first year following close and will immediately improve Adjusted EBITDA margin. Hillenbrand anticipates further margin improvement as the combined company leverages scale and realises cost savings. Hillenbrand expects to generate free cash flow greater than US$325 million by 2021, retain its investment-grade credit rating, and deploy cash flow aligned with its capital allocation strategy, including maintaining its quarterly dividend. Hillenbrand expects to refinance Milacron’s outstanding debt at close and reduce net leverage to below 2.75x within 12 months post-close.

The transaction, which is expected to close in the first calendar quarter of 2020, is subject to customary closing conditions and regulatory approvals, including the approval of stockholders of Milacron.


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