Degussa sells, OM, Ferro buy

Specialty chemical maker Degussa AG (Frankfurt, Germany) will sell its dmc² precious metals business to OM Group, Inc. (Cleveland, OH), for $1 billion. OM plans to sell several of dmc²'s non-metal specialty chemicals businesses to Ferro Corp. (Cleveland, OH) for $540 million.

Degussa is the new name for the chemicals businesses formed when Degussa Huels AG and SKW Trostberg merged earlier this year. The company has a program to sell off noncore businesses.

OM Group is best known for metal-based chemicals used in aerospace, automotive, computer, construction, and electronics. OM will own the metals management, automotive catalysts, fuel cells, precious metals chemistry, technical materials and jewelry and electroplating businesses of dmc². For the fiscal year ending December 31, 2000, metals management revenues for the businesses OM Group will keep were €5,289 million while operating revenues were €487 million (for a total of € 5,776 million); operating profits were €55 million.

Ferro will acquire the Electronic Materials, Performance Pigments, Glass Systems, and Cerdec Ceramics businesses from OM. These operations had sales of more than $520 million last year, pushing Ferro's gross over $2 billion. The acquisitions will enable Ferro to create a global electronics materials business of approximately $450 million.

The dmc² businesses to be acquired are highly complementary to Ferro's existing core businesses and will generate significant synergies. The acquisition would accelerate the Company's long-term strategic plan to expand geographically and to create a portfolio of businesses with a higher growth profile. It would also allow Ferro to achieve greater critical mass in several key businesses.

Hector R. Ortino, chairman and chief executive officer of Ferro, said, "This major acquisition is consistent with our strategic plan for growth and accelerates our execution of that plan in a number of ways. It helps us achieve our stated goal to build a core electronic materials business and builds on the TAM Ceramics and EMCA-Remex acquisitions made within the past two years. The resulting electronics business will have greater scale, broader technology and increased geographic scope. The transaction also strengthens our global position in glazes and colors for the worldwide ceramic markets and builds a stronger position for us in specialty colors. The businesses being acquired complement Ferro's existing businesses and will lead to significant synergies during a three-year integration plan. We expect the transaction to be mildly dilutive to earnings per share in the first full year, slightly accretive in year two and to add significantly to earnings per share thereafter."

Business Overview and Synergies The four businesses being acquired have operations in 22 production facilities and technical centers in all major regions of the world and include just over 2,500 employees. Annual sales for these businesses were approximately $520 million in 2000.

• Electronic Materials. dmc² supplies precious metal powders, pastes and ceramic dielectric powders for the manufacture of ceramic capacitors and other electronic components. The acquisition will more than double Ferro's electronic materials business to annual revenues of approximately $450 million and achieve Ferro's stated goal of building a $300 to $500 million presence in the electronic materials market. The acquisition will expand Ferro's geographic reach in electronic materials by adding operations in Europe and Japan. Operations of Ferro's current electronic materials business are predominantly located in the United States. The acquisition improves Ferro's technology and production capacity, particularly in base metal formulations, which are increasingly used in the ceramic capacitor market.
• Performance Pigments. dmc² produces specialty pigments and colorants to the tile, sanitaryware, dinnerware, paint and plastic industries. The addition of this business will more than double the size of Ferro's specialty color business and significantly expand its geographic position. The two businesses have synergistic research and development and manufacturing capabilities.
• Glass Systems. dmc² manufactures decorative and functional glass products for the automotive, architectural and packaging markets. These products complement existing Ferro product lines and will enable Ferro to broaden its product offering.
• Cerdec Ceramics. dmc²'s Cerdec Ceramics is a major supplier of glaze and colors to the ceramic tile industry. This complements Ferro's position in supplying the ceramic market worldwide, especially in high-end decorative materials for the sanitary and dinnerware markets. The combination of these two businesses will yield significant cost savings through a more efficient use of capacity and will be a significant cash flow generator. The acquisition will almost double the size of Ferro's ceramic tile and glaze business.

Ortino added, "We expect to continue our plan to re-shape our portfolio of product lines. With the closing of this transaction, we will have added approximately $800 million in annual revenues through acquisitions in the past two years. As a result, we have greatly strengthened Ferro's product portfolio, particularly in the development of our electronic materials business. We plan to use our experience and success with past transactions to ensure a smooth integration for this acquisition and realize the significant synergies this acquisition has to offer. This is an exciting time for Ferro as we have the opportunity to truly transform the Company and strengthen our future."

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