Terms of the deal call for Cleveland-based OM to sell its Kokkola, Finland, refinery and other assets to a group including Freeport-McMoRan, Lundin Mining Corp. and La Generale des Carrieres et des Mines (Gecamines), Democratic Republic of Congo's state-owned mining company.
The group will pay OM initial cash consideration of $325 million, and have agreed to pay up to $110 million in additional consideration based on the business achieving certain revenue targets over a period of three years.
The sale, which is expected to close by the end of April, is part of Om' broader effort to shift away from its commodity units towards higher-margin operations. The company said the proceeds from the divestiture would be used to reduce debt, and also announced a $50 million share repurchase agreement.
"The divestiture of our cobalt business is the final step in exiting our legacy commodity businesses and is consistent with our strategy to move up the value chain into technology-based businesses with attractive growth prospects and more predictable earnings profiles," Om chairman and CEO Joe Scaminace said in a statement. "Following the sale, the company will be well-positioned to achieve its core strategic objectives with a strong balance sheet and a clear vision for the future."
Post-deal Om said it will focus on segments where it can offer specialized and complex solutions including automotive systems, electronic devices, aerospace and renewable energy. Om said post-deal it would have more than $500 million in total cash. As part of the transaction Om said it would transfer its equity interest in a Congo-based joint venture known as GTL to the buyers.
Toronto-based Lundin in a statement said that it and Freeport would together fund the initial acquisition cost on a 30%-70% basis. Long-term, Freeport is expected to own 56% of the joint venture, with Lundin owning 24% and Gecamines owning the rest.
A Jones Day team led by James Dougherty and including partners Mike Solecki, Brett Barragate and Carsten Gromotke is advising OM Group.
Steven C. Todrys joined Evercore's investment banking business as a senior adviser, focusing on transactional tax and structuring solutions. For other updates launch today's Movers & shakers slideshow.
Competition Commissioner Margrethe Vestager said that mergers in the sector would continue to get close scrutiny in Brussels, particularly those that reduce the number of players in a market from four to three. More video