| 1.Background to the planned acquisition |
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Under its sixth middle-term management plan, which commenced in April 2008, Mitsubishi Rayon has placed top priority on the expansion of the scale of its core acrylics business, i.e. the MMA and AN (acrylonitrile) business complexes. In the case of the MMA business complex, in addition to expanding facilities at its existing manufacturing plants in Japan, China, and Thailand, the Company has also begun construction of new monomer and polymer production plants in Thailand and Korea with the aim of further cementing its position as a leading company in these fields in Asia. At the same time, a number of measures are being taken to lay the groundwork for the attainment of a leading position in the global market, in terms of both business scale and earnings.
MMA polymers (PMMAs), the core products of Mitsubishi Rayon, are characterized by excellent transparency and weatherability. In addition, MMA monomer can be recovered from recycled PMMA products, making them environmentally- friendly. PMMAs are used in a growing range of applications, including the IT field and the automotive industry. In addition to expanded applications, demand for PMMA products is expected to continue to increase due to the economic growth of emerging markets.
An amicable agreement, which has been reached with funds managed by Charterhouse Capital Partners LLP is for the acquisition of Lucite by Mitsubishi Rayon through purchase of all outstanding shares of the company. The acquisition has been approved by the directors of Lucite, and Lucite has issued its own press release today.
Lucite is a specialist manufacturer of MMA monomer. The business was originally formed from an amalgamation of the MMA businesses of the British company ICI (Imperial Chemical Industries) and the US company E.I. du Pont de Nemours. In 1937, ICI became the first company in the world to mass-produce methyl methacrylate (MMA) using the acetone cyanohydrin (ACH) process. Lucite is currently a leading company in the field of MMA monomer production, and owns a proprietary MMA monomer production method, known as the new ethylene process (Alpha technology). Lucite has invested in the development of this exciting new technology and a new Alpha plant in Singapore is scheduled to launch commercial production by the end of the current business year.
The acquisition will make Mitsubishi Rayon a leader in the field of MMA monomer production, and it constitutes the first step in expanding the Company’s core business, which has a high priority under the current middle-term plan. The acquisition will take Mitsubishi Rayon’s annual sales to approximately \600 billion, putting the Company well on the way towards achieving its basic target of \1 trillion in annual sales. |
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| 2.Purpose of Acquisition |
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| A leader in the world monomer market |
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| Following the acquisition, the combined production capacity of Mitsubishi Rayon and Lucite would be truly world class. It will also solidly cement the Company’s position in the fast-growing East Asian market. |
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| Creating production network spanning three continents |
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| Together with Mitsubishi Rayon’s existing production facilities in East Asia, the acquisition will give the Company new facilities in Europe and North America, thereby realizing production capabilities on three continents. The Company will thus acquire large and loyal new customer bases in Europe and the United States, making possible the faster development of new business in emerging markets such as Eastern Europe, Russia, South America, and others. |
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| Expanded range of MMA production methods |
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Mitsubishi Rayon is a pioneer of the C4 direct oxidation process of MMA production, while Lucite is a pioneer of the ACH method and the ethylene-based Alpha process.
The acquisition of Lucite will thus bring into being a single company possessing a wide array of leading MMA monomer production technologies. As the only company to have access to all three of the main technologies for MMA production, the Company will be able to adapt more flexibly to raw material trends, and will therefore be able better to serve its customers.
Moreover, the combination of the proprietary technological expertise possessed by the two companies will enhance R&D capabilities and production performance. This will lead to more rapid R&D into new technologies and improved cost efficiency, which should bear fruit in the form of further growth in revenues and earnings and will benefit the Company’s customers. |
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| Realizing merger synergies |
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The acquisition of Lucite is expected to result in lower distribution costs thanks to the shared use of logistics facilities, improved procurement efficiency thanks to joint purchasing, and lower sales costs thanks to the rationalization of overheads.
At Mitsubishi Rayon, we intend to make full use of the experience in international business operations possessed by the Lucite management team and its employees. We also aim to take full advantage of the manufacturing and R&D capabilities of all Lucite’s plants and other facilities through the common sharing of know-how in a wide range of fields including R&D, production, marketing and management. |
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| 3.Outline of Acquisition |
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Target of acquisition: Lucite International Group Limited
Sellers: Funds managed by Charterhouse Capital Partners LLP and all other shareholders.
Acquisition cost: approx. US$1.6 billion (including refinancing of outstanding borrowings)
Financial advisors: Credit Suisse Group, Mitsubishi UFJ Securities Co., Limited.
Fund procurement method: Borrowings from the Bank of Tokyo-Mitsubishi UFJ,br>Purchase schedule: November 11th, 2008 – signing of share purchase agreement.
Subject to approval by the regulatory authorities, the purchase will be concluded by the end of January 2009. |
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| 4.Changes in proportion of shares of Lucite held by Mitsubishi Rayon: |
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Prior to the purchase in question: none
Subsequent to the purchase: all outstanding shares (9,556,000 shares) |
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For Reference:
Profile of Lucite International
Trade name: Lucite International Group Limited
Representative: Ian R Lambert(CEO: Lucite International Ltd)
Head office: Southampton, England
Main business lines: Production of MMA monomer, and polymers derived from MMA monomer, as well as finished products. (Lucite is the world’s leading company in the field of MMA monomer.
Balance-sheet date: December 31st
Employees: 1,984 as of December 31st, 2007 |
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| Principal shareholders and breakdown by equity stake |
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Number of
shares held |
Equity stake |
Funds managed by
Charterhouse Capital
Partners LLP |
7,794,000 |
81.6% |
| Ineos Investors |
1,100,000 |
11.5% |
Directors of Lucite
International Group
Limited |
350,000 |
3.7% |
AMJ US employees
Halifax EES Nominees
International |
206,000
54,000
52,000 |
2.2%
0.6%
0.5% |
Principal results of Lucite International
for recent business terms
(million pounds sterling)
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2005/12 |
2006/12 |
2007/12 |
| Sales |
780 |
822 |
849 |
| EBITDA |
112 |
100 |
114 |
| Operating profit* |
64 |
49 |
67 |
* Total operating profit before exceptional expenses
Exchange rates: US dollar/Pound sterling
| USD/GBP |
Dec. 2005 |
Dec. 2006 |
Dec. 2007 |
| Year end |
1.72 |
1.96 |
1.99 |
| Annual avge. |
1.82 |
1.84 |
2.00 |
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