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Ferro Corporation Signs Agreement to Divest Tile Coatings BusinessDecember 16, 2019
Ferro Corporation (NYSE: FOE) (the Company), a leading global supplier of technology-based functional coatings and color solutions, today announced it has entered into a definitive agreement to sell its Tile Coatings Business to Pigments Spain, S.L., a company of the Esmalglass-Itaca-Fritta group, which is a portfolio company of Lone Star Funds, for $460 million in cash, with the potential for an additional $32 million in cash based on the performance of the business pre-closing, subject to customary adjustments. Consummation of the sale is subject to the receipt of regulatory approvals and the satisfaction or waiver of other customary closing conditions.
With annual sales of approximately $510 million for the twelve months ended September 30, 2019, Ferro’s Tile Coatings Business produces coatings for ceramic tiles used in residential and non-residential construction. Historically, it has been part of the Company’s Performance Coatings reporting segment, along with Ferro’s Porcelain Enamel Business, which will be retained.
"This transaction will substantially advance the Dynamic Innovation and Optimization phase of our strategy and strengthen our balance sheet,” said Peter Thomas, Chairman, President and CEO of Ferro Corporation. “It will result in a Ferro more fully focused on higher-growth industries where our market-leading technology, innovation, and customer-centric service generate higher gross margins. The transaction also will reduce our manufacturing footprint and end-market exposure in Europe, optimizing our portfolio with more equal balance between Europe and the rest of world and with less exposure to commercial and residential construction markets. Given these strategic benefits, and the enhanced balance sheet resulting from the transaction, we are confident that divesting the Tile Coatings Business will deliver substantial value for our shareholders.
We also are very pleased that our Tile Coatings colleagues will have the opportunity to grow the business and thrive under new ownership.”
Mr. Thomas added that the net proceeds from the sale principally will be used to pay down debt.
In accordance with U.S. Generally Accepted Accounting Principles, the Company expects the Tile Coatings Business will be classified as "held for sale" and reported as discontinued operations.
Lazard is acting as financial advisor and Jones Day is serving as legal counsel to Ferro on the transaction. The Company expects to discuss additional details of the transaction during its fourth quarter 2019 earnings conference call.
Esmalglass-Itaca-Fritta group, based in Villarreal, Spain, is a manufacturer of colors and glazes for the ceramic sector with an approximate turnover of 470 million euros in 2018. Esmalglass-Itaca-Fritta produces and markets a wide variety of value added products used in manufacturing and tile decoration. It supplies ceramic manufacturers globally through manufacturing and mixing facilities, warehouses, and technical and design teams around the world. Esmalglass-Itaca-Fritta has approximately 1,650 employees.
About Ferro Corporation
Ferro Corporation (www.ferro.com) is a leading global supplier of technology-based functional coatings and color solutions. Ferro supplies functional coatings for glass, metal, ceramic and other substrates and color solutions in the form of specialty pigments and colorants for a broad range of industries and applications. Ferro products are sold into the building and construction, automotive, electronics, industrial products, household furnishings and appliance markets. The Company’s reportable segments include: Performance Coatings (metal and ceramic coatings), Performance Colors and Glass (glass coatings), and Color Solutions. Headquartered in Mayfield Heights, Ohio, the Company has approximately 5,900 associates globally and reported 2018 sales of $1.6 billion.
Cautionary Note on Forward-Looking Statements
Certain statements in this press release may constitute “forward-looking statements” within the meaning of federal securities laws. These statements are subject to a variety of uncertainties, unknown risks, and other factors concerning the Company’s operations and business environment. Important factors that could cause actual results to differ materially from those suggested by these forward-looking statements and that could adversely affect the Company’s future financial performance include the following:
• Ferro’s ability to successfully complete the sale of its Tile Coatings Business, including obtaining the requisite regulatory approvals;
• demand in the industries into which Ferro sells its products may be unpredictable, cyclical, or heavily influenced by consumer spending;
• the effectiveness of the Company’s efforts to improve operating margins through sales growth, price increases, productivity gains, and improved purchasing techniques;
• currency conversion rates and economic, social, political, and regulatory conditions in the U.S. and around the world;
• the availability of reliable sources of energy and raw materials at a reasonable cost;
• Ferro’s ability to successfully implement and/or administer its optimization initiatives, including its investment and restructuring programs, and to produce the desired results;
• Ferro’s ability to successfully introduce new products and services or enter into new growth markets;
• Ferro’s ability to identify suitable acquisition candidates, complete acquisitions, effectively integrate the acquired businesses and achieve the expected synergies, as well as the acquisitions being accretive and Ferro achieving the expected returns on invested capital;
• competitive factors, including intense price competition;
• the impact of damage to, or the interruption, failure or compromise of the Company’s information systems due to events including but not limited to aging information systems infrastructure, computer viruses and cyber security breaches;
• the implementation and operations of business information systems and processes;
• increased, and possibly inconsistent, domestic and foreign regulations of privacy and data security;
• restrictive covenants in the Company’s credit facilities could affect its strategic initiatives and liquidity;
• Ferro’s ability to access capital markets, borrowings or financial transactions;
• increasingly aggressive domestic and foreign governmental regulation of hazardous and other materials and regulations affecting health, safety and the environment;
• our ability to address safety, human health, product liability and environmental risks associated with our current and historical products, product life cycles and production processes;
• exposure to lawsuits, governmental investigations and proceedings relating to current and historical operations and products;
• sale of products and materials into highly regulated industries;
• limited or no redundancy for certain of the Company’s manufacturing facilities and possible interruption of operations at those facilities;
• Ferro’s ability to protect its intellectual property, including trade secrets, or to successfully resolve claims of infringement brought against it;
• Ferro’s multi-jurisdictional tax structure and its ability to reduce its effective tax rate, including the impact of the Company’s performance on its ability to utilize significant deferred tax assets;
• the impact of the Tax Cuts and Jobs Act on our business;
• Ferro’s borrowing costs could be affected adversely by interest rate increases;
• stringent labor and employment laws and relationships with the Company’s employees;
• management of Ferro’s general and administrative expenses;
• the impact of requirements to fund employee benefit costs, especially post-retirement costs;
• implementation of business processes and information systems, including the outsourcing of functions to third parties;
• risks associated with the manufacture and sale of material into industries making products for sensitive applications;
• our ability to attract and retain key personnel;
• changes in U.S. and other governments’ trade policies;
• risks and uncertainties associated with intangible assets;
• liens on the Company’s assets by its lenders affect its ability to dispose of property and businesses;
• amount and timing of any repurchase of Ferro’s common stock;
• challenges associated with a multi-national company such as Ferro competing lawfully with local competitors in certain regions of the world;
• the effectiveness of strategies to increase Ferro’s return on invested capital, internal rate of return and other return metrics, and the short-term impact that acquisitions may have on such metrics; and
• other factors affecting the Company’s business that are beyond its control, including disasters, accidents and governmental actions.
The risks and uncertainties identified above are not the only risks the Company faces. Additional risks and uncertainties not presently known to the Company or that it currently believes to be immaterial also may adversely affect the Company. Should any known or unknown risks and uncertainties develop into actual events, these developments could have material adverse effects on our business, financial condition and results of operations.
This release contains time-sensitive information that reflects management’s best analysis only as of the date of this release. The Company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this release.
Additional information regarding these risks can be found in our Annual Report on Form 10-K for the year ended December 31, 2018.
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Source: Ferro Corporation
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