28 February 2011

5N Plus to acquire Belgian specialty metal firm MCP

5N Plus Inc of Montreal, Canada has entered into a definitive agreement to acquire Belgium-based MCP Group SA for €105.8m (CDN$141.8m) in cash, plus a promissory note to the vendors of €61.9m (CDN$82.9m) and about 11.4 million common shares.

Formed in September 2007 from the merger of specialty metal firms MCP Aramayo Ltd and Sidech SA, the private company MCP is majority-owned by co-CEOs Laurent Raskin and Frank Fache and Belgian industrial group Floridienne SA. It is currently the world's leading producer and distributor of specialty metals and their chemicals (including bismuth, indium, gallium, selenium and tellurium), which are used in a variety of products, mainly related to electronic applications. The firm has about 350 staff in eight production sites and 14 commercial offices across Europe, Asia and the USA.

5N Plus was founded in 2000 after developing electronic materials within Canadian natural resource company Noranda Inc (one of the world’s largest mining firms). It focuses on specialty high-purity metals such as tellurium, cadmium, selenium, germanium, indium and antimony and also produces related II-VI semiconducting compounds such as cadmium telluride (CdTe), cadmium sulphide (CdS) and indium antimonide (InSb) as precursors for the growth of crystals for electronic applications, including solar photovoltaic, radiation detector and infrared markets. 5N Plus owns four material subsidiaries: 5N PV GmbH (Eisenhuttenstadt, Germany), Firebird Technologies Inc (Trail, BC, Canada), 5N Plus Corp (DeForest, WI, USA) and Sylarus Technologies LLC (St George, UT, USA). The firm is an integrated producer, with both primary and secondary refining capabilities (enabling it to control the entire manufacturing process), and also provides recycling services to treat production residues.

“The acquisition of MCP will allow 5N Plus to significantly expand its product offering and to establish a worldwide manufacturing and distribution platform,” says 5N Plus’ president & CEO Jacques L’Écuyer. “This strategic transaction fits perfectly with our vision of becoming a global leader in the production of specialty metals for the clean technology market,” he adds. In particular, MCP's presence in Asia is expected to create opportunities for 5N Plus to source raw materials, reduce production costs and develop new markets.

5N Plus shares similar values and objectives to MCP, says Raskin. “We strongly believe that the combination of our two companies will yield significant synergies and bring an array of new opportunities,” he adds.

The acquisition is expected to allow 5N Plus to significantly expand its offering of metals, chemicals and compounds to the clean-tech market. 5N Plus reckons that it will become the leading producer and distributor of bismuth worldwide (a market that is poised for future growth, as non-toxic bismuth is increasingly used in various alloys and compounds). Moreover, MCP’s expertise in gallium, indium, selenium and tellurium is expected to further solidify and diversify 5N Plus’ position in the solar materials supply chain.

The acquisition is expected to be immediately accretive to 5N Plus’ earnings and free cash flow per share, before accounting for any potential synergies. Free cash flow stemming from the acquisition should further increase 5N Plus’ liquidity and flexibility to fund its future growth, the firm reckons.

During 2010, MCP generated revenue of €345m, about 40% related to bismuth products and alloys. Gross margin was about €80m and EBITDA was €35m. Following key investments in 2009–2010, MCP’s €92m working capital is at an optimal level to capitalize on market opportunities, reckons 5N Plus. Furthermore, MCP’s operations require limited capital investments with tangible fixed assets of about €23m and estimated annual maintenance capital expenditures of €5m.

MCP’s current shareholders will become significant shareholders of 5N Plus. Also, its management will remain in place. Fache will join 5N Plus’ board of directors on the close of the transaction, and Raskin is expected to also join the board at 5N Plus’ next annual meeting.

5N Plus will finance the €105.8m cash cost of the transaction with a combination of cash on hand and new credit facilities of CDN$140m committed by National Bank Financial Inc (replace 5N Plus’ existing CDN$17.5m revolving credit facility, which is currently undrawn). 5N Plus will also assume MCP's non-recourse debt financings of about €66m, most of which is used for working capital purposes. The €61.9m promissory note will be payable over a three-year period after closing. The 11.4 million shares to be issued will be subject to lock-up provisions lasting up to 18 months.

The transaction is expected to close in mid-April. It has been unanimously approved by the boards of directors of both 5N Plus and MCP and is subject to selected confirmatory due diligence, regulatory approvals and customary closing conditions.

See related items:

Atlumin and MCP Wellingborough combine operations

Atlumin and Floridienne partner to supply and reclaim Cd-containing materials

Tags: 5N Plus MCP

Visit: www.5nplus.com

Visit: www.mcp-group.com

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