Hillenbrand to acquire Milacron

 

Hillenbrand, Inc. (HI) and Milacron Holdings Corp. (Milacron) have entered into an agreement in which Hillenbrand will acquire Milacron in a cash and stock transaction valued at approximately $2 billion, including net debt of approximately $686 million as of March 31, 2019.

 

Under the terms of the agreement, which has been unanimously approved by the Boards of Directors of both companies, Milacron stockholders will receive $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. Based on Hillenbrand’s closing stock price on July 11, 2019, the last trading day prior to the announcement, the implied cash and stock consideration to be received by Milacron stockholders is $18.07 per share, representing a premium of approximately 34% to Milacron’s closing stock price on July 11, 2019, and a premium of approximately 38% to Milacron’s 30-day volume-weighted average price as of the close on July 11, 2019. Upon closing, Hillenbrand shareholders will own approximately 84% of the combined company, and Milacron stockholders will own approximately 16%.

 

Milacron manufactures, distributes, and services engineered and customized systems in the approximately $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, mold bases, and components; Advanced Plastics Processing Technologies, which designs and manufactures plastics processing equipment and systems, including injection molding, extrusion, and auxiliary systems; and Fluid Technologies, which manufactures products that are used in a variety of metalworking processes.

 

This transaction represents 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 molding to Hillenbrand’s portfolio through Milacron’s leading brands, including Mold-Masters and Milacron injection molding. Together, the combined company will have increased scale and meaningful product diversification, enhancing its ability to serve customers through complementary technologies across the plastics value chain, including plastic base resins production, compounding, processing both extruded and injection-molded products, and recycling.

 

The combined company will be able to leverage its industry-leading technologies and broadened product offerings to reach additional customer segments. Milacron’s technologies will enable Hillenbrand to offer solutions across key conversion steps in plastics processing including injection molding, 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 capitalize on emerging trends across the plastics value chain. Milacron will benefit from the Hillenbrand Operating Model (HOM), and Hillenbrand expects to leverage Milacron’s global shared services center to drive operational efficiency. The transaction is expected to generate annualized, run-rate cost synergies of approximately $50 million within three years following close, primarily through reducing public company costs, realizing operating efficiencies, and capturing direct and indirect spend opportunities. 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. These efficiencies will be driven across the combined organization through utilizing the HOM, while maintaining a commitment to serving customers with excellence and innovation.

 

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 realizes cost savings. Hillenbrand expects to generate free cash flow greater than $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.