Milacron Holdings Corp. MCRN announced that its shareholders have approved the merger agreement with Hillenbrand, Inc. HI and its subsidiary Bengal Delaware Holding Corporation.
On Jul 12, 2019, the companies had entered into the agreement, per which Hillenbrand will acquire Milacron in a cash-and-stock transaction, valued at $2 billion, including Milacron’s net debt of $686 million as of Mar 31, 2019.
Per the agreement, Milacron shareholders will receive $11.80 in cash and a fixed exchange ratio of 0.1612 shares of Hillenbrand stock for each Milacron share held.
Per Hillenbrand’s closing price on Jul 11, 2019, Milacron’s shareholders will receive $18.07 per share, which represents 34% premium to Milacron’s closing price on Jul 11, 2019. Moreover, shareholders will get 38% premium to Milacron’s 30-day volume-weighted average price as of the same date. Upon conclusion of the deal, Hillenbrand shareholders will own 84% of the combined company, while Milacron will own the balance 16%.
Milacron’s acquisition highlights compelling financial and strategic benefits.
Leading Brands & New Technologies to Drive Growth
The new entity will expand the company’s product offerings to reach additional customer segments by leveraging industry-leading technologies. Moreover, Milacron’s technologies will enable Hillenbrand to offer plastic processing solutions, including extrusion, injection molding and hot runner systems. Furthermore, the combined entity will have an extended reach in end markets, such as automotive, consumer packaging, construction, medical, recycling and electronics.
Addition of Complementary Business & Expanding Global Reach
Hillenbrand intends to add new complementary businesses in hot-runner systems and injection molding to its portfolio through Milacron’s leading brands, including Mold-Masters and Milacron injection molding. Hillenbrand’s Milacron buyout will also help it achieve leading position in plastics technology and processing. With broader global scale, product diversification and a solid presence in more than 50 countries, the combined company will be well poised to capitalize on emerging trends across the plastics value chain, including plastic base resins production, compounding, processing both extruded and injection-molded products, and recycling.
Significant Cost Synergies
While Milacron will benefit from the Hillenbrand Operating Model (HOM), Hillenbrand expects to leverage the global shared services center of the former to boost operational efficiency. This transaction is likely to generate annual, run-rate cost synergies of around $50 million within three years following the deal completion. The deal is also estimated to generate revenue synergies, by cross-selling extruder and material handling equipment. The combined organization will be committed to serve customers with innovation and excellence while gaining efficiencies through utilizing the HOM.
The aforementioned transaction is also anticipated to deliver double-digit adjusted EPS accretion in the first year following the closing.
Milacron’s shares have gained 18.4% over the past year compared with the industry’s growth of 9.2%.
Zacks Rank & Stocks to Consider
Milacron currently has a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the Industrial Products sector are Northwest Pipe Company NWPX and Tennant Company TNC. Both of the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Northwest Pipe has an expected earnings growth rate of 15.8% for the current year. The stock has appreciated 39% in a year’s time.
Tennant has a projected earnings growth rate of 29.8% for 2019. The company’s shares have rallied 26.5% over the past year.
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