Hillenbrand to Acquire the Schenck Process Food and Performance Materials Business, a Global Provider of Processing Technologies and Systems
- Builds upon momentum from Linxis, Peerless, and Gabler acquisitions in 2022 with increased scale in food end market, particularly within attractive pet food sector where the Food and Performance Materials business is a leading provider of equipment and systems
- Expands Hillenbrand's North American footprint and augments processing capabilities of Advanced Process Solutions segment across existing key end markets including durable plastics and chemicals
- Expected to be accretive to Adjusted EPS within the first full year and deliver ROIC in excess of cost of capital by year five
"With this acquisition, we further strengthen our leadership across the attractive, growing end markets of food, durable plastics and chemicals, through strong brands that enhance the breadth of our technology and service capabilities," said Kim Ryan, President and CEO of Hillenbrand. "By combining the applications and systems processing expertise of our Advanced Process Solutions segment with FPM, we will be positioned to offer greater value to our customers and drive scale benefits across manufacturing, engineering, and procurement. Over the last twelve months, we've divested our legacy death care segment, and acquired high-quality industrial businesses that serve large, attractive end markets that are underpinned by long-term, secular growth trends. These actions have significantly transformed Hillenbrand into a global leader in highly-engineered, mission-critical industrial processing solutions. I am confident this transaction further positions us to deliver compelling long-term shareholder value."
Hillenbrand expects to use cash on hand and cash available under its revolving credit facility to fund this acquisition. Following the close of the transaction, Hillenbrand's projected net debt to adjusted EBITDA ratio is expected to be approximately 3.2x, with a plan to return to its communicated target net leverage range of 1.7x to 2.7x within 15 months after closing.
Value Creation Through Enhanced Strategic Positioning
- Advances Hillenbrand's capabilities as a global industrial leader: Following the acquisitions of Linxis, Peerless, Gabler, and Herbold, and the divestiture of its death care segment,
Batesville, Hillenbrand has successfully transformed into a pure-play industrial leader in highly-engineered, mission-critical processing solutions serving large and growing end markets. Hillenbrand further expands its capabilities and industrial growth platforms through the addition of FPM.
- Captures secular trends: Immediately improves scale in attractive food categories, including pet food, through FPM's strong brands and technologies. Hillenbrand's illustrative combined revenue including FPM would be approximately
$3.3 billion, with over 25% from key growth platforms of food and recycling, which are supported by long-term, secular growth trends.
- Combines premier, high value brands with deep domain expertise and comprehensive end-to-end systems capabilities: FPM is a global leader in highly-engineered processing solutions with a deep and proprietary technology portfolio that is highly complementary to Hillenbrand's Advanced Process Solutions segment.
- Creates tangible value through synergies with anticipated ROIC above cost of capital: Hillenbrand has identified
~$20 millionof expected cost synergy opportunities across various operational initiatives. A dedicated integration team with full support of Hillenbrand's senior leadership will deploy the Hillendbrand Operating Model to drive execution of the synergy plan. The transaction is expected to be accretive to adjusted EPS in the first year after closing, with double-digit accretion anticipated thereafter as synergies accrue. Furthermore, the transaction is expected to provide an attractive, double digit ROIC by year five, exceeding Hillenbrand's estimated cost of capital.
Skadden, Arps, Slate, Meagher & Flom LLP acted as legal counsel and Credit Suisse Securities (
Hillenbrand management will hold a conference call and simultaneous webcast to discuss the proposed acquisition of FPM on Wednesday, May 24, 2023, at 8:30 a.m. (ET). The live webcast, including a slide presentation, will be available at http://ir.hillenbrand.com under the "News & Events" tab and will be archived on the company's investor relations website through Wednesday, June 21, 2023.
To access the conference call, listeners in
Hillenbrand (NYSE: HI) is a global industrial company that provides highly-engineered, mission-critical processing equipment and solutions to customers in over 100 countries around the world. Our portfolio is composed of leading industrial brands that serve large, attractive end markets, including durable plastics, food, and recycling. Guided by our Purpose — Shape What Matters For Tomorrow™ — we pursue excellence, collaboration, and innovation to consistently shape solutions that best serve our associates, customers, communities, and other stakeholders. To learn more, visit: www.Hillenbrand.com.
Disclosure Regarding Forward-Looking Statements
Throughout this release, we make a number of "forward-looking statements," including statements regarding the proposed acquisition (the "Proposed Transaction") by Hillenbrand, Inc. ("Hillenbrand" or the "Company") of the Schenck Process Food and Performance Materials ("FPM") business, such as statements about the timing and estimated synergies and other anticipated benefits of the Proposed Transaction, that are within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, and that are intended to be covered by the safe harbor provided under these sections. As the words imply, these are statements about future sales, earnings, cash flow, results of operations, uses of cash, financings, ability to meet deleveraging goals, and other measures of financial performance or potential future plans or events, strategies, objectives, beliefs, prospects, assumptions, expectations, and projected costs or savings or transactions of the Company that might or might not happen in the future, as contrasted with historical information. Forward-looking statements are based on assumptions that we believe are reasonable, but by their very nature are subject to a wide range of risks. If our assumptions prove inaccurate or unknown risks and uncertainties materialize, actual results could vary materially from Hillenbrand's expectations and projections.
Words that could indicate that we are making forward-looking statements include the following:
This is not an exhaustive list, but is intended to give you an idea of how we try to identify forward-looking statements. The absence of any of these words, however, does not mean that the statement is not forward-looking.
Here is the key point: Forward-looking statements are not guarantees of future performance or events, and actual results or events could differ materially from those set forth in any forward-looking statements. Any number of factors, many of which are beyond our control, could cause our performance to differ significantly from what is described in the forward-looking statements. These factors include, but are not limited to: global market and economic conditions, including those related to the financial markets; the impact of contagious diseases, such as the outbreak of the novel strain of coronavirus ("COVID-19") and the escalation thereof due to variant strains of the virus and the societal, governmental, and individual responses thereto, including supply chain disruptions, loss of contracts and/or customers, erosion of some customers' credit quality, downgrades of the Company's credit quality, closure or temporary interruption of the Company's or its suppliers' manufacturing facilities, travel, shipping and logistical disruptions, domestic and international general economic conditions, such as inflation, exchange rates and interest rates, loss of human capital or personnel, and general economic calamities; risks related to the
Note Regarding Certain Financial Information
The ratio of net debt to pro forma adjusted EBITDA is a key financial measure that is used by management to assess Hillenbrand's borrowing capacity (and is calculated as the ratio of total debt less cash and cash equivalents to the trailing twelve months pro forma adjusted EBITDA). Hillenbrand's illustrative combined revenue including FPM is the sum of FPM's expected calendar year 2023 revenue, based on unaudited prospective financial information prepared and provided to Hillenbrand by FPM, and Hillenbrand fiscal year 2022 net revenue pro forma for the acquisitions of Linxis, Herbold, Gabler, and Peerless, and the divestiture of
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