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Quaker Chemical Still Seeks US FTC Nod for Houghton International Merger
Friday 11 January 2019

11 January 2019 - Pennsylvania, US-based chemical supplier Quaker Chemical Corp. (NYSE: KWR) believes it will close its merger with Pennsylvania, US-based metalworking fluids and services provider Houghton International Inc "within the next few months" as it works to optain final regulatory approvals for the deal, the company said.

The deal is awaiting final regulatory approvals from the European Commission and Federal Trade Commission.

The EC conditionally approved the combination on December 11, 2018, including the remedy proposed by Quaker and Houghton. Quaker expects final approval from the EC once the final purchase agreement is in place and agreed upon by Quaker, Houghton, and the buyer of the divested product lines.

Quaker continues to be in productive discussions with the FTC, although the process is taking longer than anticipated.

Given the time lapse since Quaker's initial filing, the FTC has requested updated information as part of their approval process. In addition, the government shutdown in the US increases the uncertainty of the timeline to receive final approval.

The proposed remedy being discussed with the FTC continues to be consistent with Quaker's previous guidance that the total divested product lines will be approximately 3% of the combined companies' revenue.

Given current information, Quaker estimates that FTC final approval and closing of the combination will occur within the next few months.

Houghton International is owned by Hinduja Group's Gulf oil business.

Under the terms of the agreement, Houghton International shareholders will receive USD 172.5m of cash and 24.5% ownership of the combined company, representing approximately 4.3m shares of newly issued Quaker Chemical stock.

In addition, Quaker Chemical will assume Houghton International's debt and cash, with net debt of approximately USD 690m at year-end 2016.

The agreement has been approved by both Quaker Chemical's board of directors and Houghton International's board of directors with full support of the Hinduja Group, which will become Quaker Chemical's largest shareholder.

This deal, which was announced in April, is valued at more than USD 1.4bn in cash, stock and debt.

Quaker Chemical has secured USD 1.15bn in committed financing from Bank of America Merrill Lynch and Deutsche Bank Securities Inc. to support the transaction, which includes USD 200m of additional liquidity for future needs. The company estimates that the annual ongoing interest costs of the financing will be in the 3.0% range.

Combining Quaker Chemical's and Houghton International's product solutions and service offerings will allow the new company to better serve customers in the automotive, aerospace, heavy equipment, metals, mining, machinery, marine, offshore, and container industries, the companies said.

The expanded portfolio is expected to allow further expansion into growth markets that include India, Korea, Japan, and Mexico.

Following closing of the transaction, the new company is expected to have a 12-member board of directors, consisting of nine directors from Quaker Chemical and three directors to be nominated by the Hinduja Group. 

Deutsche Bank Securities Inc. is serving as Quaker Chemical's lead financial advisor. RBC Capital Markets, LLC is serving as exclusive financial advisor to Houghton International.
Details
Date Published: 11/01/2019
Target: Houghton International
Country: USA
Deal Size: 1.4bn (USD)
Sector: Chemicals
Type: Corporate acquisition
Financing: Cash and Stock
Status: Agreed
Vendor: Hinduja Group
Buyer: Quaker Chemical
Buyer Advisor: Deutsche Bank Securities
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