BetzDearborn-Hercules Merger Creates Premier Paper Industry Specialty Chemicals Enterprise
The merger of BetzDearborn Inc. and Hercules Inc., announced today, creates a new enterprise with the most complete offering of specialty pulp and paper chemicals in the world. Combined revenues for the two companies will exceed $3.5 billion. The deal is scheduled to be completed in the fourth quarter of this year.
Specifics of the merger call for Hercules to acquire all BetzDearborn shares at $72/share, for a total of around $2.4 billion. Hercules will also assume some $700 million in BetzDearborn debt. The enterprise will operate under the Hercules banner, with headquarters in Wilmington, DE. The water and industrial process treatment division of BetzDearborn, which adds a significant new business sector to the Hercules operation, will continue to operate under the BetzDearborn name. The cash merger is subject to approval of BetzDearborn shareholders.
Both companies see significant growth opportunities in the merger, to the tune of at least $100 million in captured synergies. Hercules plans to retain BetzDearborn's sales and marketing force, and "talented" employees in both companies reportedly will have significant opportunities for growth and advancement.
Keith Elliott, Hercules chairman and CEO, stated that "on the paper chemical side, BetzDearborn is a world leader in process chemicals with strengths in customer service and support. By combining their expertise with our leading position in functional chemicals and low-cost manufacturing capabilities, we will be better positioned to meet paper manufacturers' growing demand for integrated services and innovative, cost- effective solutions. We share strong technology skills, similar chemistries, and a focus on reducing operating costs for customers, which will create new growth opportunities for the combination."
Elliott added that, as with Hercules' recent acquisitions of Citrus Colloids, Houghton's paper chemicals business, and FiberVisions, "this transaction meets or exceeds our stated criteria of fitting well with our core franchises, producing significant accretion in both cash earnings and reported earnings, and achieving an internal rate of return that is at least a 50% premium to the cost of capital."
William Cook, BetzDearborn chairman, president and CEO, said that the merger "is an extraordinarily good business fit for both of our companies. We are bringing together the best attributes of BetzDearborn and Hercules to create a powerful new specialty chemicals company with the technology, financial, and manufacturing strengths to achieve strong growth in today's highly competitive global marketplace. The merger will create value for our shareholders, provide valuable benefits to our customers, and provide the vast majority of our highly talented and dedicated employees with significant opportunities for career growth and advancement."
Elliott and Cook will head up Hercules as co-CEOs, with Elliott serving as chairman of the board and Cook as vice chairman. Other senior managers of the combined company include Vincent Corbo, Hercules president and COO, and George MacKenzie, Hercules SVP and CFO (who will continue in these positions), Dominick DiDonna, SVP-international and GM of paper technology at Hercules (who will be SVP of the combined paper business), and Larry Rankin, exec. VP at BetzDearborn and chairman of BetzDearborn Canada (who will be SVP of the BetzDearborn water treatment and industrial process business).
Cook and three other BetzDearborn directors will join the Hercules Board, increasing its size from 10 to 14 members. Three teams will develop integration plans for implementation immediately after closing. These integration teams, led by DiDonna for the paper business, Rankin for the water treatment and industrial process business, and MacKenzie for corporate functions, will all report to Corbo, who will spearhead the effort to combine the strengths and resources of both companies.
BetzDearborn, headquartered in Trevose, PA, had 1997 sales of $1.3 billion. The company serves customers in more than 90 countries with a global workforce of 6,400 employees, 31 production plants, five R&D centers, and regional centers in North America, Europe, Latin America and Asia Pacific.
Hercules' businesses include Aqualon, FiberVisions, Food Gums, Paper Technology, and Resins. The company, with $1.9 billion in sales last year, has some 7,000 employees, 49 manufacturing plants, two major research centers and eight applications laboratories.