Hillenbrand announces hat it has entered into a definitive agreement to acquire the Schenck Process Food and Performance Materials business, a portfolio company of Blackstone, for an enterprise value of approximately $730 million. The transaction is expected to close during Hillenbrand's fiscal fourth quarter of 2023, subject to regulatory approvals and other customary closing conditions.
Headquartered in Kansas City, Missouri, FPM has over 1,300 global employees and sells to customers in over 150 countries, with approximately 85% of revenues generated in North America. FPM specializes in the design, manufacturing and service of feeding, filtration, baking, and material handling technologies and systems that are highly complementary to the equipment and solutions currently offered in Hillenbrand's Advanced Process Solutions segment. FPM is expected to generate calendar year 2023 revenue of approximately $540 million and approximately $68 million of EBITDA. Upon closing, FPM will become part of the Advanced Process Solutions segment.
"With this acquisition, we further strengthen our leadership across the attractive, growing end markets of food, durable plastics and chemicals, through strong brands that enhance the breadth of our technology and service capabilities," said Kim Ryan, president and CEO of Hillenbrand. "By combining the applications and systems processing expertise of our Advanced Process Solutions segment with FPM, we will be positioned to offer greater value to our customers and drive scale benefits across manufacturing, engineering, and procurement. Over the last twelve months, we've divested our legacy death care segment, and acquired high-quality industrial businesses that serve large, attractive end markets that are underpinned by long-term, secular growth trends. These actions have significantly transformed Hillenbrand into a global leader in highly-engineered, mission-critical industrial processing solutions. I am confident this transaction further positions us to deliver compelling long-term shareholder value."
Hillenbrand expects to use cash on hand and cash available under its revolving credit facility to fund this acquisition. Following the close of the transaction, Hillenbrand's projected net debt to adjusted EBITDA ratio is expected to be approximately 3.2x, with a plan to return to its communicated target net leverage range of 1.7x to 2.7x within 15 months after closing.
Value Creation Through Enhanced Strategic Positioning
- Advances Hillenbrand's capabilities as a global industrial leader: Following the acquisitions of Linxis, Peerless, Gabler, and Herbold, and the divestiture of its death care segment, Batesville, Hillenbrand has successfully transformed into a pure-play industrial leader in highly-engineered, mission-critical processing solutions serving large and growing end markets. Hillenbrand further expands its capabilities and industrial growth platforms through the addition of FPM.
- Captures secular trends: Immediately improves scale in attractive food categories, including pet food, through FPM's strong brands and technologies. Hillenbrand's illustrative combined revenue including FPM would be approximately $3.3 billion, with over 25% from key growth platforms of food and recycling, which are supported by long-term, secular growth trends.
- Combines premier, high value brands with deep domain expertise and comprehensive end-to-end systems capabilities: FPM is a global leader in highly-engineered processing solutions with a deep and proprietary technology portfolio that is highly complementary to Hillenbrand's Advanced Process Solutions segment.
- Creates tangible value through synergies with anticipated ROIC above cost of capital: Hillenbrand has identified ~$20 million of expected cost synergy opportunities across various operational initiatives. A dedicated integration team with full support of Hillenbrand's senior leadership will deploy the Hillendbrand Operating Model to drive execution of the synergy plan. The transaction is expected to be accretive to adjusted EPS in the first year after closing, with double-digit accretion anticipated thereafter as synergies accrue. Furthermore, the transaction is expected to provide an attractive, double digit ROIC by year five, exceeding Hillenbrand's estimated cost of capital.
Skadden, Arps, Slate, Meagher & Flom LLP acted as legal counsel and Credit Suisse Securities (USA) LLC acted as a financial advisor for Hillenbrand.
Hillenbrand management will hold a conference call and simultaneous webcast to discuss the proposed acquisition of FPM on Wednesday, May 24, 2023, at 8:30 a.m. (ET). The live webcast, including a slide presentation, will be available at http://ir.hillenbrand.com under the "News & Events" tab and will be archived on the company's investor relations website through Wednesday, June 21, 2023.
To access the conference call, listeners in the United States and Canada may dial +1 (877) 407-8012, and international callers may dial +1 (412) 902-1013. Please use conference call ID number 13738990. A replay of the call will be available until midnight ET, Wednesday, June 7, 2023, by dialing +1 (877) 660-6853 toll free in the United States and Canada or +1 (201) 612-7415 internationally and using the conference ID number 13738990.