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Element (ESI) Acquires Coventya, Expands Industrial Offerings
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Element Solutions Inc. (ESI - Free Report) recently announced a binding offer to acquire Coventya Holding SAS, which is a global provider of specialty chemicals for the surface finishing industry. Per the terms of the offer, Element will pay roughly €420 million in cash, including the assumption or repayment of debt, subject to certain adjustments.
The transaction is expected to close either in the late third quarter or the fourth quarter of 2021, subject to receipt of certain regulatory approvals, completion of required employee consultation procedures and other customary closing conditions. Upon the closing of the deal, Coventya will join MacDermid Enthone Industrial Solutions and will be reported within Element’s Industrial & Specialty segment.
Element noted that it was optimistic about the transaction as Coventya’s business synchronizes with its acquisition principles and its outstanding team customer relationships will be beneficial for the former. Coventya has a prestigious history of offering premium and innovative solutions in niche markets.
Element also expects the acquisition to have positive outcomes for both companies and their customers and shareholders. On a pro forma basis, the acquisition is expected to add around 7 cents to its annualized adjusted EPS before synergies, representing accretion of roughly 5% based on its previously announced adjusted EPS guidance of $1.30 or more for 2021.
Moreover, Element expects at least €13 million in annual synergies to be realized over the two years following the close of the transaction. The company believes that it is a rare opportunity, which will enable it to take its business to new heights.
Its prudent balance sheet management has empowered it to fund this transaction without additional equity while continuing its goal of maintaining a net leverage ratio at or below 3.0x at the end of 2021.
The acquisition boosts Element’s global position and expands offerings across industrial surface treatment markets. Additionally, it expects its MacDermid Enthone Industrial Solutions business to benefit from enhanced scale and strong complementary product offerings.
Coventya considers the transaction to be a great milestone for the company. Combined efforts of the companies will provide customers with a wide range of enhanced and differentiated solutions.
Shares of Element have soared 121.3% over the past year against the 16.3% decline of the industry. The company’s estimated earnings growth rate for the year is pegged at 42.7%.
Image Source: Zacks Investment Research
The company, in its first-quarter call, increased its adjusted EPS guidance to at least $1.30, up from the prior view of $1.10-1.15. It also expects adjusted EBITDA in a band of $500-$510 million and anticipates generating a free cash flow of $285 million for 2021, up from $275 million expected earlier.
For the second quarter, it expects EBITDA in the range of $125-$130 million and cost inflation to slightly affect profitability.
Cabot has a projected earnings growth rate of 125.9% for the current year. The company’s shares have risen 69.9% in a year.
Olin has a projected earnings growth rate of 506.7% for the current year. The company’s shares have soared 277.9% in a year.
Tronox has a projected earnings growth rate of 242.9% for the current year. The company’s shares have jumped a whopping 214.7% in a year.
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Image: Bigstock
Element (ESI) Acquires Coventya, Expands Industrial Offerings
Element Solutions Inc. (ESI - Free Report) recently announced a binding offer to acquire Coventya Holding SAS, which is a global provider of specialty chemicals for the surface finishing industry. Per the terms of the offer, Element will pay roughly €420 million in cash, including the assumption or repayment of debt, subject to certain adjustments.
The transaction is expected to close either in the late third quarter or the fourth quarter of 2021, subject to receipt of certain regulatory approvals, completion of required employee consultation procedures and other customary closing conditions. Upon the closing of the deal, Coventya will join MacDermid Enthone Industrial Solutions and will be reported within Element’s Industrial & Specialty segment.
Element noted that it was optimistic about the transaction as Coventya’s business synchronizes with its acquisition principles and its outstanding team customer relationships will be beneficial for the former. Coventya has a prestigious history of offering premium and innovative solutions in niche markets.
Element also expects the acquisition to have positive outcomes for both companies and their customers and shareholders. On a pro forma basis, the acquisition is expected to add around 7 cents to its annualized adjusted EPS before synergies, representing accretion of roughly 5% based on its previously announced adjusted EPS guidance of $1.30 or more for 2021.
Moreover, Element expects at least €13 million in annual synergies to be realized over the two years following the close of the transaction. The company believes that it is a rare opportunity, which will enable it to take its business to new heights.
Its prudent balance sheet management has empowered it to fund this transaction without additional equity while continuing its goal of maintaining a net leverage ratio at or below 3.0x at the end of 2021.
The acquisition boosts Element’s global position and expands offerings across industrial surface treatment markets. Additionally, it expects its MacDermid Enthone Industrial Solutions business to benefit from enhanced scale and strong complementary product offerings.
Coventya considers the transaction to be a great milestone for the company. Combined efforts of the companies will provide customers with a wide range of enhanced and differentiated solutions.
Shares of Element have soared 121.3% over the past year against the 16.3% decline of the industry. The company’s estimated earnings growth rate for the year is pegged at 42.7%.
The company, in its first-quarter call, increased its adjusted EPS guidance to at least $1.30, up from the prior view of $1.10-1.15. It also expects adjusted EBITDA in a band of $500-$510 million and anticipates generating a free cash flow of $285 million for 2021, up from $275 million expected earlier.
For the second quarter, it expects EBITDA in the range of $125-$130 million and cost inflation to slightly affect profitability.
Element Solutions Inc. Price and Consensus
Element Solutions Inc. price-consensus-chart | Element Solutions Inc. Quote
Zacks Rank & Other Stocks to Consider
Element currently has a Zacks Rank #2 (Buy).
Other top-ranked stocks in the basic materials space are Cabot Corporation (CBT - Free Report) , Olin Corporation (OLN - Free Report) and Tronox Holdings PLC (TROX - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Cabot has a projected earnings growth rate of 125.9% for the current year. The company’s shares have risen 69.9% in a year.
Olin has a projected earnings growth rate of 506.7% for the current year. The company’s shares have soared 277.9% in a year.
Tronox has a projected earnings growth rate of 242.9% for the current year. The company’s shares have jumped a whopping 214.7% in a year.
Time to Invest in Legal Marijuana
If you’re looking for big gains, there couldn’t be a better time to get in on a young industry primed to skyrocket from $17.7 billion back in 2019 to an expected $73.6 billion by 2027.
After a clean sweep of 6 election referendums in 5 states, pot is now legal in 36 states plus D.C. Federal legalization is expected soon and that could be a still greater bonanza for investors. Even before the latest wave of legalization, Zacks Investment Research has recommended pot stocks that have shot up as high as +285.9%.
You’re invited to check out Zacks’ Marijuana Moneymakers: An Investor’s Guide. It features a timely Watch List of pot stocks and ETFs with exceptional growth potential.
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