- Apollo offers $34 per share, a 28 pct premium
- OM was targeted by hedge fund in January
- OM has 35-day “go-shop” period to solicit other offers
OM said on June 1 that the private equity firm’s offer of $34 per share represents a premium of 28 percent to its May 29 close.
Shares of OM, which had a market value of about $805 million as of May 29, rose as much as 29 percent to a 14-month high of $34.16 on the New York Stock Exchange.
OM has been hurt by the slowdown in industrial activity in Europe, mainly in Germany, its biggest market. The company gets about half of its total revenue from Germany.
“Its most important segment, the magnetic technologies business, has gone sideways in terms of its growth and margins,” BB&T Capital Markets analyst Christopher Kapsch said. “The changes that the company has been trying to effect at magnetic technologies have yet to get much traction.”
The magnetic technologies business accounted for about 46 percent of OM’s total sales in 2014, with chemicals business contributing about 30 percent.
The company was targeted in January by hedge fund FrontFour Capital Group LLC, its fifth-largest shareholder as of March 31.
FrontFour had said then that OM had a “bloated cost structure” and was “significantly overcapitalized.”
OM reached an agreement with FrontFour in March to nominate two independent directors to its board slate.
Under the terms of the Apollo Global deal, OM has a 35-day “go-shop” period to solicit other offers.
The deal is expected to close by the end of 2015, OM said.
The company also said Apollo Global would sell its industrial chemicals business to specialty chemical maker Platform Specialty Products for $365 million in cash.
BNP Paribas was OM’s financial adviser for the deal, while Deutsche Bank Securities Inc was the financial adviser to OM’s board.
Apollo Global is being advised by Lazard and Credit Suisse, which is also providing debt financing for the deals.
Credit Suisse and Barclays are providing debt financing to Platform Specialty.
OM’s shares were up 28 percent at $33.99 in afternoon trading. Up to its close on May 29, the stock had fallen about 14 percent in the past 12 months, while the S&P 600 Materials Index had fallen about 7 percent.
(Reporting by Ankit Ajmera for Reuters)