European Commission clearance for OMNOVA

Synthomer plc

26th March 2020

Synthomer plc ('Synthomer')

European Commission clearance for OMNOVA acquisition;

Trading update and suspension of dividend

Synthomer is pleased to announce today that the conditions attached to the European Commission's clearance decision issued on 15^th January 2020 have been satisfied and no other regulatory approvals are outstanding for the completion of the acquisition of OMNOVA Solutions Inc ("OMNOVA"). The acquisition is expected to complete by 1^st April 2020. This follows receipt of approval for the agreed sale of its PYRATEX™ VP Latex business to Trinseo. Completion of the divestment to Trinseo, which represents less than 0.5% of Synthomer 2019 sales, is subject to approval from competition authorities but this does not impact the completion of the OMNOVA transaction.

The transaction creates a global speciality chemicals company with significant scale and a robust platform from which to invest in future growth. Synthomer becomes a major world-wide player in water-based polymer solutions with greater customer reach and strong operational capabilities and will be in an excellent position to invest in growth, innovation, and people.

The acquisition materially strengthens Synthomer's presence in North America, as well as increases its presence in Europe and Asia, including further penetration into the high growth Chinese market. Synthomer intends to utilise best practices from across the enlarged Group to improve productivity and reduce costs.

Since announcing the transaction in July 2019, Synthomer has done as much as possible before completion with strong cooperation between respective teams meaning that it is ready to move forwards on integration whilst mindful of the current environment. As previously announced, and confirmed today, the acquisition is expected to result in estimated recurring pre-tax cost synergies of US$29.6 million per annum following completion.

Trading update

To date, the Group has experienced a solid start to the year with trading in line with 2019 and expectations set out at the time of Synthomer's FY results. Demand has been especially strong in our Nitrile Latex business.

Whilst the impact on both production and demand from COVID-19 has been limited to date, the ongoing spread of the virus clearly presents significant uncertainty. We continue to prioritise the safety and well-being of our employees around the world whilst continuing to deliver for customers.

As also announced earlier this month, the Group is well advanced on plans to realise further efficiencies across the business and with raw material prices falling, working capital will reduce this year. Furthermore, with additional capacity at our plants in Asia and Europe now onstream, capital expenditure will be much lower than 2019.

Liquidity and Banking covenants

Based on the latest published results of Synthomer and OMNOVA, the pro forma leverage of the enlarged Group was 2.5x net debt/EBITDA*.

The new financing facilities, as negotiated on signing the Merger Agreement in July 2019 and effective at completion, include the committed unsecured 5 year €460m RCF and $260m term loan bank facilities. These provide the enlarged Group significant leverage and additional liquidity headroom with the net debt/EBITDA* leverage covenant (excluding impact of IFRS 16) set at 4.25x for 2020 and 3.75x for 2021, and estimated cash and undrawn facilities of approximately €170m and €380m respectively, a total liquidity of €550m.

In addition to these bank facilities, Synthomer also has a committed unsecured €520m bridge in place running through until October 2021, which will be refinanced appropriately ahead of this.

The Company also entered into a deal contingent FX hedge to purchase $480m for a fixed € value to mitigate the FX exposure risk arising on the $ purchase price of OMNOVA.

Dividend suspension

Despite the Group's strong financial position, the uncertainty relating to COVID-19 means that alongside the efficiency measures we are taking to preserve cash, the Board has decided not to recommend the payment of a final dividend for 2019. This decision will be reviewed later in the year once the outlook becomes clearer. The Board believes that this is an appropriate and prudent measure to take as it seeks to preserve Synthomer's strong liquidity, cashflow and financial position through these uncertain times.

Commenting, Calum MacLean, CEO of Synthomer said:

"It is very exciting to have reached this point, a transformational moment in Synthomer's history. Synthomer now has global reach, a broader product portfolio and increased R&D capabilities with an exciting platform from which to attract talent and invest in future growth. We have a clear integration plan for bringing the two businesses together, which will in turn enable us to deliver significant synergies.

Clearly these are uncertain times but our significant liquidity headroom, ongoing efficiency programme and increased focus on ways to preserve cash, ensure that Synthomer and its highly experienced team is fully equipped to manage the current environment.

I look forward to working closely with new colleagues around the world to take Synthomer forward."

*Excluding IFRS 16 Leases.

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