TAGS: Epoxy Adhesives Sustainability / Natural Adhesives
Hexion Holdings Corporation announced its plan to separate into two independent companies. The two companies will be “Hexion Holdings,” composed of the company’s adhesives and Versatic Acids™ and derivatives product lines, and “Hexion Coatings and Composites (US) Inc.” (“HCC”), composed of Hexion Holdings’ former epoxy-based coatings and composites products. HCC will be renamed at a later date.
Strategic Focus to Serve Customers’ Needs
Hexion Holdings anticipates that the HCC separation transaction will be in the form of a distribution of 100% of the stock of HCC, a new and independent company to current holders of Hexion Holdings common stock and warrants. Upon completion of the HCC spin, current Hexion Holdings shareholders will own shares of both Hexion Holdings and HCC. As previously disclosed, Hexion Holdings will file a registration statement on Form S-1 with the U.S. Securities and Exchange Commission for a proposed initial public offering on the New York Stock Exchange.
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Today marks the beginning of an exciting new chapter in Hexion's 122-year history, and continues our strategy of narrowing our focus, improving the Company’s financial flexibility and driving long-term value creation for shareholders,” said Craig Rogerson, Hexion chairman, president, and chief executive officer.
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With our performance, and after a comprehensive evaluation of strategic actions aimed at unlocking the value of our businesses, our Board and management team have determined that it is the right time to pursue a separation through an IPO and spinoff. The transaction will provide each company with significant liquidity, a sharper strategic focus, and appropriately capitalized balance sheets while we continue to serve our customers’ needs. It is a testament to the people and focuses on operational execution that the company has reached this milestone where the businesses are ideally positioned to be two strong standalone companies,” added Rogerson.
Benefits of Separation
The company believes that this separation will result in material benefits to the standalone companies, including:
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Distinct strategic and management focus on specific operational, R&D, and growth priorities, including the analysis of macroeconomic trends and the implementation of financial targets that best fit each business
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A capital structure, dividend policy, and capital deployment strategy tailored to specific business models and growth strategies. Both businesses are expected to have direct access to the debt and equity capital markets to fund their respective growth strategies
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An investor base that is aligned with the streamlined value proposition for each company
Hexion Holdings will continue to build on its strong momentum, driven primarily by strong new residential construction and remodeling demand in North America, continued capacity expansion progress and gains from innovative new products, as well as the need for more sustainable building and coatings materials. As a standalone company, Hexion Holdings is expected to have favorable cash flow attributes and a stronger financial profile.
Hexion Holdings generated historical net sales of $2.5 billion and pro forma net sales of approximately $1.4 billion for the year ended December 31, 2020. Hexion is expected to maintain appropriate debt levels going forward.
HCC to Expand Leadership & Global Presence
HCC will consist of Hexion Holdings’ former base and specialty epoxy resins product lines. HCC will remain a leading global supplier of epoxy resins and systems. As a standalone company, HCC will have a greater ability to grow and expand its leadership position in attractive global markets. Importantly, HCC is also focused on addressing customers’ demands for more environmentally preferred solutions, and providing innovative solutions for the wind energy and automotive industries.
With its senior management team based in Rotterdam, the Netherlands, HCC expects to maintain a global presence. Stafford, Texas, will serve as its primary U.S. office and HCC will also maintain an executive office in Shanghai, China. In addition, HCC will continue to operate world-scale epoxy plants in Pernis and Deer Park, Texas, as well as additional manufacturing operations in the United States, Germany, Spain, and South Korea.
HCC generated total sales of approximately $1.1 billion for the year ended December 31, 2020. HCC is expected to maintain appropriate debt levels going forward.
Hexion Holdings and HCC are expected to enter into a Shared Services Agreement, which will provide for Hexion Holdings to provide to HCC, on a transitional basis, certain services or functions that the companies historically have shared, and one or more commercial agreements relating to the ownership, management, maintenance, support and use of certain shared operations services by Hexion Holdings to HCC.
The HCC separation transaction is targeted to be completed in the fourth quarter of 2021, subject to final approval by the Board of Directors, customary regulatory approvals, and tax and legal considerations.
Moelis & Company LLC and Morgan Stanley & Co. LLC are serving as strategic advisors in connection with the strategic review, and Paul, Weiss, Rifkind, Wharton & Garrison LLP and Davis Polk & Wardwell LLP are serving as an offering and M&A counsel to Hexion.
Source: Hexion