UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): March 29, 2013
OM GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or other jurisdiction of incorporation)
001-12515
(Commission File Number)
52-1736882
(I.R.S. Employer Identification Number)
127 Public Square
1500 Key Tower
Cleveland, Ohio 44114-1221
(Address of principal executive offices)
(Zip code)
(216) 781-0083
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filling is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d.2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e.4(c)) |
Item 2.01. Completion of Acquisition or Disposition of Assets.
On March 29, 2013, OM Group, Inc. completed its previously announced divestiture of the cobalt-based business of its Advanced Materials segment pursuant to the Asset and Stock Purchase Agreement among OM Group and certain of its affiliates with Freeport-McMoRan Corporation and Koboltti Chemical Holdings Limited.
OM Group received cash consideration of $325 million, plus approximately $30 million for cash on hand, upon the closing of the transaction. OM Group will use these proceeds to repay a substantial portion of its debt. The sale agreements also provide for potential future cash consideration of up to an additional $110 million based on the business achieving certain revenue targets over a period of three years. The purchase price is subject to adjustment based on a post-closing analysis of the closing date balance sheet.
In connection with the sale, OM Group also transferred its equity interests in its DRC-based joint venture known as GTL to its joint venture partners, subject to a security interest in favor of OM Group with respect to the joint venture’s performance of certain supply arrangements.
Attached hereto as Exhibit 99.1 is OM Group’s press release issued March 29, 2013 announcing the completion of this divestiture.
Item 9.01. Financial Statements and Exhibits.
| (b) | Pro Forma Financial Information. |
The Unaudited Proforma Condensed Consolidated Balance Sheet of OM Group as of December 31, 2012 assumes the sale and transfer had been completed as of that date. The Unaudited Proforma Condensed Statement of Consolidated Operations of OM Group assumes the sale and transfer had occurred January 1, 2012. The unaudited proforma statements are provided for illustrative purposes only and are not necessarily indicative of what OM Group’s financial position or results of operations would have been had the disposition occurred on the dates indicated. The unaudited proforma statements should be read in conjunction with Notes to Proforma Condensed Consolidated Financial Statements and OM Group’s historical financial statements and related notes.
These statements are attached as Exhibit 99.2.
| (d) | Exhibits. |
| 99.1 | Press Release issued by OM Group, Inc., dated March 29, 2013 |
| 99.2 | Unaudited Proforma Condensed Consolidated Balance Sheet of OM Group, Inc. as of December 31, 2012 and Unaudited Proforma Condensed Statement of Consolidated Operations of OM Group, Inc. for the year ended December 31, 2012 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| OM GROUP, INC. | ||||
| By: | /s/ Valerie Gentile Sachs | |||
| Valerie Gentile Sachs | ||||
| Vice President, General Counsel and Secretary | ||||
Date: April 4, 2013
EXHIBIT INDEX.
| 99.1 | Press Release issued by OM Group, Inc., dated March 29, 2013 | |
| 99.2 | Unaudited Proforma Condensed Consolidated Balance Sheet of OM Group, Inc. as of December 31, 2012 and Unaudited Proforma Condensed Statement of Consolidated Operations of OM Group, Inc. for the year ended December 31, 2012 | |
Exhibit 99.1
OM Group, Inc. Completes Divestiture Of Its Cobalt Business For $325 Million In Cash
CLEVELAND, March 29, 2013 /PRNewswire/ — OM Group, Inc. (NYSE: OMG) today announced that it has completed the previously-announced divestiture of its Advanced Materials business, including the sale of its downstream business, to a joint venture held by Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX), Lundin Mining Corporation (TSX: LUN) and La Generale des Carrieres et des Mines (Gecamines). OM Group received cash consideration of $325 million, plus approximately $30 million for cash retained in the business, upon the closing of the transaction. OM Group expects to use these proceeds, along with cash on-hand, to repay a substantial portion of its debt. The sale agreements also provide for potential future cash consideration of up to an additional $110 million based on the business achieving certain revenue targets over a period of three years.
In connection with the sale, OM Group also transferred its equity interests in its DRC-based joint venture known as GTL to its joint venture partners, subject to a security interest in favor of OM Group with respect to the joint venture’s performance of certain supply arrangements.
Following the sale, to assist the buyer of the downstream business with the ownership transition, the Company will act as an intermediary of cobalt supply between GTL and the Freeport joint venture under a two-year agreement subject to delivery of 7,000 MT of feed. Also, OM Group will continue to serve as the U.S. distributor for refined cobalt products for a period of one year. Both of these transition service agreements are back-to-back arrangements with minimal profit or cash flow impact anticipated for OM Group.
ABOUT OM GROUP
OM Group is a technology-based industrial growth company serving attractive global markets, including automotive systems, electronic devices, aerospace, industrial and renewable energy. Its business platforms use innovative technologies and expertise to address customers’ complex applications and demanding requirements. For more information, visit the Company’s website at www.omgi.com.
FORWARD-LOOKING STATEMENTS
The foregoing discussion may include forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based upon specific assumptions and are subject to uncertainties and factors relating to the company’s operations and business environment, all of which are difficult to predict and many of which are beyond the control of the company. These uncertainties and factors could cause actual results of the company to differ materially from those expressed or implied in the forward-looking statements contained in the foregoing discussion. Such uncertainties and factors include: risks arising from uncertainty in worldwide economic conditions; extended business interruption at our facilities; fluctuations in the price and uncertainties in the supply of rare earth materials and other raw materials; our ability to identify, complete and integrate acquisitions aligned with our strategy; restrictive covenants in our Senior Secured Credit Facility which may affect our ability to operate our business successfully;
indebtedness may impair our ability to operate our business successfully; changes in effective tax rates or adverse outcomes resulting from examination of our income tax returns; the majority of our operations are outside the United States, which subjects us to risks that may adversely affect our operating results; level of returns on pension plan assets and changes in the actuarial assumptions; the majority of our cash is generated and held outside the United States; the timing and amount of common share repurchases, if any; fluctuations in foreign exchange rates; unanticipated costs or liabilities for compliance with environmental regulation; changes in environmental, health and safety regulatory requirements; technological changes in our industry or in our customers’ products; our ability to adequately protect or enforce our intellectual property rights; disruption of our relationship with key customers or any material adverse change in their businesses; successful execution of the GTL supply agreement signed in connection with the Advanced Materials sale; and the Risk Factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2012.
SOURCE OM Group, Inc.
Rob Pierce, Vice President, Finance, +1-216-263-7489
Exhibit 99.2
OM Group, Inc.
Proforma Condensed Consolidated Balance Sheet
As of December 31, 2012
(Unaudited)
| Disposition of | Proforma | Proforma | ||||||||||||||
| (in thousands) | Dec 31, 2012 | AM (1) | Adjustments (2) | Dec 31, 2012 | ||||||||||||
| ASSETS |
||||||||||||||||
| Current assets |
||||||||||||||||
| Cash and cash equivalents |
$ | 227,612 | (11,573 | ) | — | A | 216,039 | |||||||||
| Restricted cash on deposit |
22,793 | (22,793 | ) | — | — | |||||||||||
| Accounts receivable, less allowance of $4,971 in 2012 |
174,613 | (37,248 | ) | — | 137,365 | |||||||||||
| Inventories |
463,093 | (189,222 | ) | — | 273,871 | |||||||||||
| Refundable and prepaid income taxes |
3,207 | (4,697 | ) | — | (1,490 | ) | ||||||||||
| Other current assets |
48,258 | (21,174 | ) | — | 27,084 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total current assets |
939,576 | (286,708 | ) | — | 652,868 | |||||||||||
| Property, plant and equipment, net |
496,755 | (141,335 | ) | — | 355,420 | |||||||||||
| Goodwill |
543,269 | (103,326 | ) | — | 439,943 | |||||||||||
| Intangible assets, net |
429,672 | (621 | ) | — | 429,051 | |||||||||||
|
Notes receivable from joint venture partner, |
16,015 | — | (16,015 | ) B | — | |||||||||||
| Other non-current assets |
74,140 | (5,817 | ) | (10,680 | ) C | 57,643 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total assets |
$ | 2,499,427 | (537,806 | ) | (26,695 | ) | 1,934,926 | |||||||||
|
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|
|
|
|
|
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|
|||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||||||||||
| Current liabilities |
||||||||||||||||
| Current portion of long-term debt |
$ | 13,309 | — | — | 13,309 | |||||||||||
| Accounts payable |
128,381 | (51,388 | ) | — | 76,993 | |||||||||||
| Liability related to joint venture partner injunction |
22,793 | (22,793 | ) | — | — | |||||||||||
| Accrued income taxes |
23,913 | (796 | ) | — | 23,117 | |||||||||||
| Accrued employee costs |
41,762 | (8,828 | ) | — | 32,934 | |||||||||||
| Deferred income taxes |
4,724 | — | — | 4,724 | ||||||||||||
| Purchase price of VAC payable to seller |
75,351 | — | — | 75,351 | ||||||||||||
| Other current liabilities |
69,012 | (3,750 | ) | — | 65,262 | |||||||||||
|
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|
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|
|
|||||||||
| Total current liabilities |
379,245 | (87,555 | ) | — | 291,690 | |||||||||||
| Long-term debt |
454,054 | — | (342,153 | ) A | 111,901 | |||||||||||
| Deferred income taxes |
121,451 | (9,574 | ) | — | 111,877 | |||||||||||
| Pension liabilities |
233,823 | — | — | 233,823 | ||||||||||||
| Purchase price of VAC payable to seller |
11,259 | — | — | 11,259 | ||||||||||||
| Other non-current liabilities |
55,446 | (5,555 | ) | — | 49,891 | |||||||||||
| Total OM Group, Inc. stockholders’ equity |
1,206,710 | (397,683 | ) | 315,458 | D | 1,124,485 | ||||||||||
| Noncontrolling interests |
37,439 | (37,439 | ) | — | (0 | ) | ||||||||||
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|||||||||
| Total liabilities and equity |
$ | 2,499,427 | $ | (537,806 | ) | $ | (26,695 | ) | $ | 1,934,926 | ||||||
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|||||||||
OM Group, Inc.
Proforma Condensed Statement of Consolidated Operations
Year Ended December 31, 2012
(Unaudited)
| Disposition of | Proforma | Proforma | ||||||||||||||
| (in thousands, except per share data) | 2012 | AM (3) | Adjustments (4) | 2012 | ||||||||||||
| Net sales |
$ | 1,637,791 | (447,050 | ) | 143,391 | 1,334,132 | ||||||||||
| Cost of goods sold |
1,381,441 | (408,172 | ) | 145,510 | 1,118,779 | |||||||||||
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|||||||||
| Gross profit |
256,350 | (38,879 | ) | (2,119 | ) E | 215,353 | ||||||||||
| Selling, general and administrative expenses |
260,519 | (32,452 | ) | — | 228,067 | |||||||||||
| Gain on sale of property |
(2,857 | ) | — | — | (2,857 | ) | ||||||||||
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|
|||||||||
| Operating profit (loss) |
(1,312 | ) | (6,427 | ) | (2,119 | ) | (9,857 | ) | ||||||||
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|
|||||||||
| Total other income (expense) |
(47,137 | ) | (150 | ) | 22,052 | F | (25,235 | ) | ||||||||
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|
|||||||||
| Income (loss) from continuing operations before income tax expense |
(48,449 | ) | (6,576 | ) | 19,933 | (35,092 | ) | |||||||||
| Income tax (expense) benefit |
2,771 | 14,936 | — | 17,707 | ||||||||||||
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|
|||||||||
| Income (loss) from continuing operations, net of tax |
(45,678 | ) | 8,360 | 19,933 | (17,386 | ) | ||||||||||
| Income (loss) from discontinued operations, net of tax |
(266 | ) | — | — | (266 | ) | ||||||||||
|
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|
|||||||||
| Consolidated net income (loss) |
(45,944 | ) | 8,360 | 19,933 | (17,652 | ) | ||||||||||
| Net (income) loss attributable to noncontrolling interests |
7,063 | (7,063 | ) | — | — | |||||||||||
|
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|
|||||||||
| Net income (loss) attributable to OM Group, Inc. common stockholders |
$ | (38,881 | ) | $ | 1,297 | $ | 19,933 | $ | (17,652 | ) | ||||||
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|||||||||
| Earnings per common share — basic: |
||||||||||||||||
| Income (loss) from continuing operations attributable to OM Group, Inc. common stockholders |
$ | (1.21 | ) | 0.04 | 0.63 | (0.54 | ) | |||||||||
| Income from discontinued operations attributable to OM Group, Inc. common stockholders |
(0.01 | ) | — | — | (0.01 | ) | ||||||||||
|
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|
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|
|||||||||
| Net income (loss) attributable to OM Group, Inc. common stockholders |
$ | (1.22 | ) | $ | 0.04 | $ | 0.63 | $ | (0.55 | ) | ||||||
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|||||||||
| Weighted average shares outstanding |
||||||||||||||||
| Basic |
31,885 | — | — | 31,885 | ||||||||||||
| Assuming dilution |
31,885 | — | — | 31,885 | ||||||||||||
| Amounts attributable to OM Group, Inc. common stockholders: |
||||||||||||||||
| Income (loss) from continuing operations, net of tax |
$ | (38,615 | ) | $ | 1,297 | $ | 19,933 | $ | (17,386 | ) | ||||||
| Income (loss) from discontinued operations, net of tax |
(266 | ) | — | — | (266 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net income (loss) |
$ | (38,881 | ) | $ | 1,297 | $ | 19,933 | $ | (17,652 | ) | ||||||
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OM Group, Inc
Notes to Proforma Condensed Consolidated Financial Statements
(Unaudited)
| (1) | Elimination of the Advanced Materials segment assets and liabilities from OM Group’s historical net assets as a result of the sale of its cobalt-based business and the transfer of its equity interest in DRC-based joint venture, GTL. |
| (2) | A) Net cash proceeds as follows used to make required debt prepayment: |
| Cash proceeds from sale |
336,600 | |||
| Transaction costs |
(9,800 | ) | ||
| Estimated working capital adjustment (i) |
15,353 | |||
|
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|
|||
| Net cash proceeds |
342,153 | |||
| Less: Required debt prepayment |
(342,153 | ) | ||
|
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|||
| Net change in cash |
— |
| (i) | Net cash proceeds will be affected by the final working capital adjustment. |
| B) | Reserve for notes due from joint venture partner as a result of the transaction |
| C) | Write-off of deferred financing fees related to required debt prepayments made with net cash proceeds |
| D) | Calculation of estimated loss on disposition (i): |
| Net cash proceeds from sale |
342,153 | |||
| Net assets of Advanced Materials segment |
(397,683 | ) | ||
| Reserve for notes due from joint venture partner |
(16,015 | ) | ||
| Write-off of deferred financing fees |
(10,680 | ) | ||
| Valuation of potential future cash consideration (ii) |
— | |||
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|||
| Estimated net loss on disposition |
(82,225 | ) |
| (i) | The actual loss will be determined as of the closing date, March 29, 2013, and could be materially different than the estimate. |
| (ii) | Based on current cobalt prices and volumes, the Company does not believe that the revenue targets on which the potential future cash consideration is based are probable of being met. |
| (3) | Elimination of the Advanced Materials segment revenues and expenses from OM Group’s historical results as a result of the sale of its cobalt-based business and the transfer of its equity interest in DRC-based joint venture. |
| (4) | Reflects other effects of the disposition including: E) a minimal net loss due to our role as i) intermediary for the ongoing supply agreement between GTL and the Kokkola refinery primarily in back-to-back arrangements for a period of at least two years and the obligation to pay certain royalties and taxes on by-product exports, and as ii) the U.S. distributor for refined cobalt products in primarily back-to-back arrangements for a period of one year (actual results could be materially different than these estimates), and F) interest savings on debt prepayments required to be made with net cash proceeds at an estimated interest rate of 5.75% and lower amortization of deferred financing fees written off due to the prepayment of debt. |