Improves Ferro’s Position in High-End Tile CoatingsExpands Presence in Important Growth MarketsProvides Additional Capacity for High-End Frits and Digital InksExpected to Be Accretive to Adjusted EPS by $0.12 to $0.14 in 2015
CLEVELAND — Ferro Corporation (NYSE: FOE, “Company”) announced today that it has signed a definitive agreement with Milan, Italy-based Private Equity Funds’ Management Company Star Capital SGR S.p.A. and two minority owners and founders Gianfranco Padovani and Sergio Zannoni to acquire Casola Valsenio, Italy-based Vetriceramici S.p.A. for €83 million (approximately $108 million) in cash. The transaction will be funded with excess cash and a draw on the Company’s existing revolving credit facility and is expected to close by December 1, 2014, subject to customary closing conditions.
Vetriceramici is a leading supplier of ceramic coatings to high-end tile manufacturers. Vetriceramici had July 2014 trailing twelve month sales of approximately €53 million, and over the last three fiscal years achieved compounded annual sales growth of 9.3%. Vetriceramici operates manufacturing facilities in Italy and Mexico, a mixing plant in Poland and research and development and sales offices in Italy and Turkey. The transaction is expected to be accretive to Ferro’s adjusted diluted earnings per share by $0.12 to $0.14 in 2015. Based on estimated July 2014 trailing twelve month EBITDA and expected synergies, the acquisition purchase price of $108 million represents a transaction multiple of 4.9X.
Vetriceramici is a leading global supplier of specialty products that enhance the appearance and improve the durability of high-end ceramic tile. Its product line includes high-value, specialty frits and grits (finely-milled frits), glazes, digital inks, and other specialized tile coatings. Additionally, Vetriceramici has developed high-value forehearth color solutions that deliver greater production flexibility, lower manufacturing costs and improved inventory management to customers. The acquisition is expected to improve Ferro’s growth opportunities by enhancing its product portfolio and improving its position in important growth markets, including the United States, Mexico, Turkey, and Eastern Europe.
Commenting on the proposed transaction, Peter Thomas, Chairman, President and CEO of Ferro Corporation said, “Vetriceramici is an excellent strategic fit with our existing tile coatings business and our performance colors and glass business. The acquisition demonstrates our commitment to transforming Ferro into a more focused functional coatings and color solutions company. Vetriceramici improves our product portfolio by adding higher-value product offerings, enhances our technical capabilities with state-of-the-art design and product development facilities, and accelerates our geographic expansion into important growth markets, including the United States, where we do not have a ceramic coatings presence, as well as Turkey and Poland. We expect this investment will achieve a return on invested capital of greater than 12% in the first year of operation and expect the return on invested capital to improve to greater than 15% within an acceptable timeframe. The proposed transaction is an excellent example of the type of growth opportunities we are seeking to drive shareholder value and build upon our market leadership positions. We will continue to focus resources on our glass-based coatings businesses, adding to our frit production capacity and expanding our geographic footprint. We are excited about the growth prospects associated with our core strategic platform and are actively pursuing additional opportunities.”
Ferro was advised by Jones Day. William Blair & Company and K Finance acted as financial advisors to the sellers. Legal advisor to the sellers was Accinni, Cartolano e Associati.
About Ferro Corporation
Ferro Corporation (http://www.ferro.com) is a leading global supplier of technology-based performance materials, including glass-based coatings, pigments and colors, and polishing materials. Ferro products are sold into the building and construction, automotive, appliances, electronics, household furnishings, and industrial products markets. Headquartered in Mayfield Heights, Ohio, the Company has approximately 4,020 employees globally.
Vetriceramici S.p.A. (http://www.vetriceramici.com) designs, develops, manufactures, and supplies special products for the ceramics industry in Italy and internationally. Vetriceramici produces fusion colored grains, technical grains, matte colored micro-grains, frits, double charge products, ceramic glazes, and inks for digital printing. Its products are used in various high-value applications in the ceramic tile and color and glass markets. Vetriceramici was founded in 1987 by Gianfranco Padovani and Sergio Zannoni, employs over 200 people and is based in Casola Valsenio, Italy.