Quaker Houghton · NYSE:KWR
Quaker Houghton — Quaker Chemical — Merger or Acquisition (April 2017)
21 slides from Quaker Houghton's merger presentation, Apr 5, 2017
Slide 1: Quaker Chemical to Combine with Houghton International
1 April 5, 2017 Quaker Chemical to Combine with Houghton International
Slide 2: Risks And Uncertainties Statement
Risks And Uncertainties Statement Regulation G The attached charts include Company information that does not conform to generally accepted accounting principles (“GAAP”) . Management believes that an analysis of this data is meaningful to investors because it provides insight with respect to ongoing
Slide 3: Agenda
Agenda » Transaction Overview » Houghton International Background » Strategic Rationale » Quaker + Houghton = A Compelling Combination » Financing and Cash Flow Summary » Timing / Conclusion 1
Slide 4: Transaction Overview
Transaction Overview Purchase Price and Structure ▪ Houghton shareholders to receive $172.5 million in cash and 24.5% (~4.3 million shares) of Quaker; Quaker will assume Houghton’s net debt of approximately $690 million ▪ Represents an enterprise value of approximately $1.42 billion (a) ▪ Represents
Slide 5: Houghton International: A Global Leader In Metalworking Fluids And Services
▪ Founded in 1865 as E.F. Houghton & Co. ▪ Corporate headquarters in Valley Forge, PA ▪ A global leader in advanced metalworking fluids and services ▪ Leading positions in specialty lubricants and hydraulic fluids to the metals, coatings and offshore drilling markets, selling into 88 countries ▪ 15
Slide 6: Strategic Rationale
Strong Talent and Cultural ▪ Combined 250 years dedicated to customers in these unique industries ▪ Two talent - rich organizations with similar core values ▪ Shared customer intimate business model Increases Size and Scale ▪ Combined Company has ~2x sales and ~2.5x adjusted EBITDA of Quaker ▪ Scala
Slide 7: Quaker + Houghton = A Compelling Combination
Quaker + Houghton = A Compelling Combination 5
Slide 8: Competitive Advantage: People Make The Difference
Unsurpassed Customer Commitment and Industry Expertise ▪ Value - added sales process requires technical, highly trained associates with deep industry knowledge ▪ Combination brings together two talent - rich companies committed to the industries served ▪ Each company brings customer relationships de
Slide 9: Diversified Product And Geographic Profile
North America 45% South America 4% EMEA 27% Asia Pacific 24% North Americ … South America 5% EMEA 31% Asia Pacific 24% Sales By Geography Combined Primary Metals 50% Metalworking 42% Coatings 8% Combined Sales By Product Type Prima ry Met … Metalworki ng 67% Other 6% 7 North America 36% EMEA 35% Asi
Slide 10: Highly Synergistic Footprint
Q+H corporate headquarters Global facilities North America South America EMEA Asia Pacific Total 8 1 6 4 19 6 1 4 4 15 Enhanced Global Scale with 34 Global Facilities Supporting ~15,000 Customers 8 Highly Synergistic Footprint
Slide 11: Expands Cross-Selling Opportunities / Accelerated Revenue Growth
Common Products Forming Fluids x Metal Cutting and Deformation x Corrosion Protection Fluids x Fluid Power x Industrial Process Cleaners x Food and Beverage Can Processing x 9 Complementary Products Specialty Greases x + Offshore Control Hydraulics + x High Pressure Die Casting x + Heat Treat Quench
Slide 12: Significant Cost Synergies
Readily Achievable Cost Synergies Year 1 Year 2 Year 3 ($ in millions) Synergy Realization Timing ~$20 ~$35 ~$4 5 ▪ Manufacturing footprint optimization ▪ Raw material purchasing ▪ Freight / warehousing ▪ Ester production ▪ Headcount reductions ▪ Non - labor SG&A ▪ Optimize IT platforms 10 Significa
Slide 13: Enhanced Financial Profile
Enhanced Financial Profile $120 $45 $107 $272 Run-Rate Synergies New Quaker 2016 Adjusted EBITDA ($ millions) Run - Rate Synergies ($ in millions ) Combined synergies (a) ∆ vs. Quaker standalone 2016 Sales $747 $767 $1,514 +2x 2016 Adjusted EBITDA $107 $120 $272 +2.5x 2016 Adjusted EBITDA margin 14%
Slide 14: Financing Overview
Financing Overview ▪ Committed $1.15 billion from Bank of America and Deutsche Bank ▪ Plan to syndicate bank facility in next 30 - 60 days » $400 million revolver (~$200 million funded at close) » $575 million Term Loan A » $175 million (euro - equivalent) Term Loan A ▪ $950 million in new debt to f
Slide 15: Capital Allocation: Reducing Debt Becomes A Priority
▪ Strong Free Cash Flow generation supports rapid debt reduction and balanced capital allocation approach: ▪ Focus on deleveraging to 2x - 2.5x adjusted EBITDA ratio ▪ Combined company has asset - lite profile with expected capex of ~1.5% of sales ▪ Pay dividends consistent with Quaker’s practice ov
Slide 16: Closing Process And Timing
Closing Process And Timing Signing » Announcement » Official Filings with SEC and Competition Authorities » Begin Regulatory Review Period Regulatory Review Period » Government Review » Integration Planning » Shareholder Approval Closing » Regulatory Approval » Close » Integration Begins April 2017
Slide 17: Quaker + Houghton: A Value-Creating Combination
Quaker + Houghton: A Value - Creating Combination x Strong Talent and Cultural Fit x Increases Size and Scale x Accelerates Growth Opportunities x Achieves Significant Cost Synergies x Balanced Capital Structure Approach x Strong Free Cash Flow 15
Slide 18: Appendix
@ Quaker Appendix
Slide 19: Quaker Chemical: A Global Leader In Specialty Lubricants
Key Facts ▪ Founded in 1918 ▪ Corporate HQ in Conshohocken, PA ▪ Leading positions in specialty lubricants to the metals, costings and fluid markets ▪ 36 locations in 25 countries ▪ R&D Centers Globally: 2016 Spend $23M ▪ Serving over 2,500 customers globally Primar y Metals 50% Metalworkin g 42% Co
Slide 20: 2016 Adjusted EBITDA Reconciliation
2016 Adjusted EBITDA Reconciliation ($ in millions) Net income attributable to Quaker Chemical Corporation $61 Net interest expense 1 Tax expense on income before equity in net income of associated companies 23 Depreciation 13 Amortization 7 EBITDA $105 Equity income in a captive insurance company (
Slide 21: Additional Information About the Proposed Transaction
19 In connection with the proposed transaction, Quaker will file a proxy statement with the Securities and Exchange Commission . INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THIS PROXY STATEMENT WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION . Investors and security h