Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - HEXION INC. | d8k.htm |
| EX-99.1 - COMBINATION AGREEMENT - HEXION INC. | dex991.htm |
 September
13,
2010
Creating a Global Leader in
Specialty Chemicals and Materials
Exhibit 99.2 |
 2
Forward-Looking Statements
Certain statements in this presentation, including but not limited to those made under the caption
“Outlook” are forward-looking statements within the meaning of and made pursuant
to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. In addition, our management may from
time to time make oral forward-looking statements. All statements, other than statements of
historical fact, could be forward- looking statements. Forward-looking statements
may be identified by the words “believe,” “expect,” “anticipate,” “project,” “plan,”
“estimate,” “will” or “intend” or similar expressions.
Forward-looking statements reflect our current expectations and assumptions regarding our
businesses, the economy and other future events and conditions, and are based on currently available financial
economic and competitive data and current business plans. Actual results could vary materially
depending on risks and uncertainties that may affect operations, markets, services, prices and
other factors as discussed in the most recent Annual Report on Form 10-K and the other
filings made by Hexion Specialty Chemicals, Inc. (“Hexion”) and Momentive Performance
Materials Inc. (“Momentive”) with the Securities and Exchange Commission (SEC). We
caution you against relying on any forward-looking statements as they are neither
statements of historical fact nor guarantees of future performance. •
Important factors that could cause actual results to differ materially from those in the
forward-looking statements include regional or global economic, competitive and regulatory
factors including, but not limited to, the current credit crises and global economic
downturn, interruptions in the supply of or increased pricing of raw materials due to natural
disasters, pricing actions by our competitors that could affect our operating margins, changes
in governmental regulations involving our products, and the following:
•
risks and uncertainties from the possibility that the closing of the transaction may be delayed or not
occur, •
difficulties with the integration process or realization of benefits from the transaction
•
our inability to achieve expected cost savings,
•
the outcome of litigation described in the footnote to financial statements on Commitments and
Contingencies in the most recent Hexion and Momentive Annual Reports on Form 10-K,
•
our failure to comply with financial covenants under our credit facilities or other debt, and
•
the other factors described in the Risk Factors sections of the Annual Reports on Form 10-K and in
the other Hexion and Momentive SEC filings.
•
Any forward-looking statement made by us in this document speaks only as of the date on which it
is made. Factors or events that could cause our actual results to differ may emerge from
time to time. |
 3
Creating One of the Largest Specialty Chemical
and Material Companies in the World
1H 2010 Annualized PF Revenue
(1)
: $7.47 bn
1H 2010 Annualized PF Adj. EBITDA
(2)
:
$1.24 bn
(1)
Reflects 1H’10 revenue of Hexion and Momentive on a pro forma annualized basis.
(2)
This presentation contains non-GAAP financial information. Adjusted
EBITDA is a non-GAAP financial measure as defined by SEC rules. Adjusted EBITDA is not
intended to represent any measure of earnings or cash flow in accordance with US GAAP and the
calculation and use of this measure may differ from other companies. Adjusted EBITDA should not
be used in isolation or as a substitute for measures of performance or liquidity. Adjusted EBITDA should not be considered an alternative to
operating income or net income (loss) under US GAAP to evaluate results of operations or as an
alternative to cash flows as a measure of liquidity. Pro Forma Adjusted EBITDA for the combined
entities reflects Hexion Specialty Chemical, Inc.'s previously reported Segment EBITDA for the six-month period ended June 30, 2010 and
Momentive Performance Materials Inc.'s previously reported Adjusted EBITDA for the six-month
period ended June 27,2010, in each case on a pro forma annualized basis, as well as $100
million in estimated synergies from the transaction and Hexion's $70 million of in-process productivity savings at June 30, 2010. For additional
information on Hexion's Segment EBITDA and Momentive's Adjusted EBITDA, including a reconciliation of
such previously reported amounts to such company's net income (loss), please see such company's
most recent Quarterly Report on Form 10-Q for the period then ended. |
 4
Transformational Merger: Building a Global Leader
in Specialty Chemicals & Materials
•
Momentive Performance Materials Holdings Inc., the parent company of
Momentive Performance Materials, Inc., and Hexion LLC, the parent
company of Hexion Specialty Chemicals, Inc., today jointly announced that
their newly formed holding companies plan to merge, creating a new global
leader in specialty chemicals and materials
•
The Boards of Directors of Momentive Performance Materials Holdings Inc.
and Hexion LLC have unanimously approved the transaction, which is
subject to customary conditions
•
Anticipated closing on October 1, 2010
•
The legal structure will not require a refinancing of either company’s
debt A NEW GLOBAL LEADER IN SPECIALTY CHEMICALS AND MATERIALS
|
 5
Strategic Rationale for the Combination
•
The combination will create one of world’s largest specialty chemical
companies:
–
1H’10 annualized pro forma sales of $7.47 billion
–
1H’10 annualized pro forma Adj. EBITDA of $1.24 billion
–
More than 10,000 associates
–
117 facilities globally
•
Industry leadership positions in more than 80 percent
of its portfolio with a
range of attractive technologies including: Silicones, Quartz, Specialty Epoxy
resins, Specialty Phenolic resins, Acrylic and Versatic™
Acids
and Derivatives
•
Balanced geographic portfolio with an ability to serve global customers in all
major regions of the world
•
Accelerates portfolio optimization opportunities
(1)
(1)
As of 12/31/09 |
 6
Strategic Rationale for the Combination
•
The newly-formed company will leverage the best demonstrated business
processes delivering optimal cost, cash, margin and growth opportunities
•
The combination delivers a conservative estimate of $100 million
in synergies
–
Best-of-sourcing contractual terms
–
Regional site rationalization
–
Shared services optimization
•
The new Momentive provides an opportunity to leverage geographic
growth positions across the high growth regions --
Latin America, Asia Pacific,
India and the Middle East
•
New Product Development synergy opportunities also exist across a range of
technologies in shared end use markets, such as energy, automotive,
construction and electronics |
 7
7
BRIC/ROW
28%
Europe
33%
N. America
41%
PF Geographical Revenue
Hexion & Momentive Will Form a $7.5 billion
Specialty Chemical & Materials Company
PF Revenue by Industry
DIVERSE INDUSTRIES AND GEOGRAPHICAL PRESENCE
SUPPORT GROWTH OBJECTIVES |
 8
Global Leadership Positions Across a Broad Range of
Technologies and Industries
THE COMBINED COMPANY WOULD HAVE LEADING MARKET POSITIONS
IN MORE THAN 80% OF ITS REVENUE BASE
Forest Product Resins
Global
Oilfield Proppant Resins
Global
Phenolic Specialty
Resins
Global
Versatic™
Acids &
Derivatives
Global
Specialty Epoxy
Global
Silicones
Global
Quartz
Global
Base Epoxy Resins
Global |
 9
Conservative Synergy Targets
•
Targeting $100 million in
synergies from the transaction
•
Both companies have strong
track records of achieving
planned cost savings
•
The Company is expected to
realize $70 million of Hexion’s
in-process productivity actions
•
Projected savings to be
allocated
between the two
companies
$49
$37
$14
Corporate /
SG&A
Raw Material &
Indirect Procurement
Logistics
Optimization
Targeted Synergies
($ in millions)
(1)
(1)
Reflects Hexion in-process productivity actions as of June 30, 2010
|
 10
Proven Ability to Dramatically Exceed Cost Reduction
Targets
25
56
72
23
37
66
27
32
37
0
20
40
60
80
100
120
140
160
180
200
Original Target
Revision #1
Final Achievement
Hexion Formation Synergies
Sourcing
Mfg.
SG&A
Sourcing
Mfg.
SG&A
Sourcing
Mfg.
SG&A
•
Prior to current productivity program, Hexion aggressively
achieved synergies from the formation of the Company
•
Hexion’s recession driven productivity program has added
an incremental $250mm in cost savings
0
20
40
60
80
100
120
140
160
180
200
2007
2008
2009
$75
$125
$175
Momentive Cumulative Annual Savings
$190
$106
$26
($ in millions)
($ in millions)
•
Since its separation from General Electric Company,
Momentive consistently has taken significant actions to
improve the operating leverage of its business
•
Structural actions include SG&A and indirect expense
reduction, material productivity and facility rationalizations
(1)
(1)
Includes temporary pay and benefit reductions for salaried workforce, which yielded
$15 million and $4 million of savings, respectively, in 2009. 84
80
26
26
26
80 |
 11
Broad Geographic Footprint Provides an
Excellent Platform for Growth
Asia Pacific: 28 Facilities
Americas: 55 Facilities
Europe: 34 Facilities
THE NEW MOMENTIVE WILL SERVE MORE THAN 20,000 CUSTOMERS FROM 117
GLOBAL SITES |
 12
A Diversified Customer Base with Global
Leadership Positions
SERVING CUSTOMERS THROUGH LEADING TECHNICAL SERVICES, A DIVERSE
TECHNOLOGY PORTFOLIO AND A GLOBAL FOOTPRINT |
 13
Significant Growth Opportunities Exist From Common
Industry Segments |
 14
Technology
Cross
Fertilization
Global
Expansion
Market
Penetration
Product Portfolio and Global Expansion Plans Provide
a Strong Base for Growth
Waterborne Coatings Resins
–
Silane
modifiers (Momentive) in
combination with latex and epoxy
coatings (Hexion) for expanded
waterborne and solvent borne portfolio
Building & Construction
–
Glazing materials for
glass and walls
(Momentive) and
adhesive mortars for
insulation and exterior
finishing systems
(Hexion)
Electronics
–
Momentive and Hexion
participate throughout the
value chain –
from wafer
processing through
assembled electronic
components |
 15
Building and Construction / Civil Engineering
Epoxy, RDP, wax emulsions
Silanes, Sealants
Electronic Applications
Epoxy, Phenolics
Elastomers
Silanes, Sealants
Silicones, Engineered Materials
Coating Applications
Medium and High Voltage Electrical Applications
Epoxy, Acrylic, Versatics
Silicone Fluids
Phenolic and Epoxy based
Proppants
Oilfield Technologies
Epoxy, Phenolics
Multiple Opportunities for Top line Growth |
 16
New Structure Upon Closing
Momentive
Performance
Materials Holdings Inc.
(Delaware)
Momentive
Performance
Materials Inc.
(Delaware)
Various U.S. and
foreign subsidiaries
Various U.S. and
foreign subsidiaries
Hexion LLC
(Delaware)
Momentive
Performance
Materials Holdings LLC
(Delaware)
Summary
•
Existing capital structures will remain
separate and in place upon closing
•
No financing required for the
transaction
•
No breakage costs for either
company
•
Upon closing, new structure would
not impact collateral or covenant
compliance requirements for existing
Hexion or Momentive debt
Hexion Specialty
Chemicals, Inc.
(New Jersey) |
 17
0
1,000
2,000
3,000
4,000
5,000
2010
2011
2012
2013
2014
2015
2016
2017
2018
2021
2023
Momentive
($ in millions)
Hexion
Maturity Schedule
Combined OpCo
Debt Maturities
STABLE, LONG-TERM CAPITAL STRUCTURE
WITH NO MATERIAL NEAR-TERM MATURITIES |
 18
Summary: Combination Creates Value for
Both Companies
•
Top-line growth:
Transaction will provide entry to end markets and geographic
regions of the world that neither company could fully access independently
•
Expanded
Technology
Portfolio:
Unmatched
depth
and
breadth
of
specialty
products leveraging our proprietary technology base
•
Unique Customer Solutions:
Further penetration of customer base via
cross-selling and new product development opportunities
•
Streamlined Operations:
Synergy savings will further improve combined
company operations and operating leverage
•
Best Practices:
Combined company will leverage best practices of each
company, such as technology/R&D and supply chain expertise
•
World-Class Management Team:
Combined company leadership will be
formed from both companies |
 19
Next Steps
•
Teams composed of Momentive & Hexion associates are working
to finalize plans to optimize operations
•
Anticipated closing on October 1, 2010
•
Information will be shared as we move through the planning
process
A TRANSFORMATIONAL MERGER THAT CREATES A NEW MARKET LEADER
IN SPECIALTY CHEMICALS AND MATERIALS |
 Creating a Global Leader in Specialty Chemicals and Materials
|