Element Solutions Inc Announces Definitive Agreement to Sell MacDermid Graphics Solutions

Rhea-AI Summary

Element Solutions Inc (NYSE:ESI) has announced an agreement to sell its MacDermid Graphics Solutions business to XSYS for an enterprise value of approximately $325 million. This sale represents substantially all of Element Solutions' Graphics Solutions reporting vertical. The transaction is expected to close in late 2024 or the first half of 2025, subject to customary conditions and regulatory approvals.

Key points:

• Net proceeds will be used to reduce leverage and for general corporate purposes
• An existing capital loss should offset nearly all taxable gains from the transaction
• The sale aligns with Element Solutions' strategy to focus on its core markets
• The company expects improved growth and cash flow conversion post-sale

Positive

• Sale of MacDermid Graphics Solutions for $325 million enterprise value
• Expected reduction in leverage and improved balance sheet
• Potential for faster growth and greater cash flow conversion post-sale
• Existing capital loss to offset nearly all taxable gains from the transaction

Negative

• Divestment of a substantial part of the Graphics Solutions reporting vertical
• Extended timeline for transaction closure (late 2024 or first half of 2025)

Insights

Financial Analyst

The sale of MacDermid Graphics Solutions for $325 million is a significant move for Element Solutions. This divestiture will streamline ESI's portfolio, potentially improving its focus on core businesses. The expected use of proceeds to reduce leverage is financially prudent, enhancing the company's balance sheet strength.

While the sale may result in a short-term revenue decrease, the improved cash flow conversion and stronger financial position could offset this impact in the long run. The existing capital loss offsetting taxable gains is a tax-efficient strategy, maximizing the financial benefit of the transaction.

Investors should monitor how effectively ESI redeploys capital and executes its growth strategy in core markets post-divestiture. The delayed closing timeline (late 2024 or H1 2025) provides ample time for the market to adjust expectations and for ESI to plan its next strategic moves.

Market Research Analyst

This divestiture signifies a strategic shift in Element Solutions' business focus. By selling off its flexographic printing plate business, ESI is likely responding to changing market dynamics in the specialty chemicals sector. The move suggests that the company sees greater growth potential in its other core markets.

The buyer, XSYS, being a specialist in the flexographic printing industry, may be better positioned to drive growth in this specific segment. This could lead to increased competition for ESI in related markets. However, it also allows ESI to concentrate resources on areas where it has a stronger competitive advantage.

Investors should assess how this portfolio reshaping aligns with broader industry trends and ESI's long-term growth strategy. The transaction's impact on ESI's market position and potential for value creation in its remaining core businesses will be important factors to watch.

MIAMI--(BUSINESS WIRE)-- Element Solutions Inc (NYSE:ESI) (“Element Solutions”), a global and diversified specialty chemicals company, today announced an agreement to sell its flexographic printing plate business, MacDermid Graphics Solutions, to XSYS, a global specialist provider in the flexographic printing industry, for an enterprise value of approximately $325 million. The MacDermid Graphics Solutions business transferring to XSYS constitutes substantially all of Element Solutions’ Graphics Solutions reporting vertical. An existing capital loss should offset nearly all taxable gains from this transaction. Net proceeds are expected to be used to further reduce leverage and for general corporate purposes. The transaction is expected to close in late 2024 or the first half of 2025, subject to customary closing conditions, adjustments, and regulatory approvals.

President and Chief Executive Officer Benjamin Gliklich commented, “MacDermid Graphics is a quality business that is non-core to Element Solutions’ portfolio and long-term vision. XSYS represents a great home for its excellent team. Our portfolio going forward will be more focused and better positioned for even faster growth and greater cash flow conversion with a stronger balance sheet to pursue future growth opportunities in our core markets.”

About Element Solutions

Element Solutions Inc is a leading global specialty chemicals company whose businesses supply a broad range of solutions that enhance the performance of products people use every day. Developed in multi-step technological processes, these innovative solutions enable customers' manufacturing processes in several key industries, including consumer electronics, power electronics, semiconductor fabrication, communications and data storage infrastructure, automotive systems, industrial surface finishing, consumer packaging and offshore energy.

More information about the Company is available at www.elementsolutionsinc.com.

Forward-Looking Statements

This press release contains forward-looking statements, including, but not limited to, statements regarding whether and when the sale of Element Solutions’ Graphics Solutions business will be consummated and the closing will occur, as well as the anticipated tax treatment, use of proceeds and benefits of the transaction. These statements are based on the assessment of information available to management as of the current date and management's estimates, assumptions or expectations with respect to future events. These statements are believed to be reasonable, though are inherently difficult to predict. Actual results could differ materially from those projected as a result of certain factors including, without limitation, regulatory actions and other factors included in Element Solutions’ Form 8-K periodic reports, 10-Q quarterly reports, 10-K annual report and other reports filed or to be filed with the Securities and Exchange Commission. Element Solutions undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240903193103/en/

Investor Relations Contact:

Varun Gokarn

Senior Director, Strategy and Finance

Element Solutions Inc

1-203-952-0369

IR@elementsolutionsinc.com

Media Contact:

Scott Bisang / Ed Hammond / Tali Epstein

Collected Strategies

1-212-379-2072

esi@collectedstrategies.com

Source: Element Solutions Inc

FAQ

What is Element Solutions Inc (ESI) selling and to whom?

Element Solutions Inc (ESI) is selling its MacDermid Graphics Solutions business, which constitutes substantially all of its Graphics Solutions reporting vertical, to XSYS, a global specialist provider in the flexographic printing industry.

What is the value of the MacDermid Graphics Solutions sale by Element Solutions (ESI)?

The sale of MacDermid Graphics Solutions by Element Solutions (ESI) is valued at an enterprise value of approximately $325 million.

When is the MacDermid Graphics Solutions sale by Element Solutions (ESI) expected to close?

The sale of MacDermid Graphics Solutions by Element Solutions (ESI) is expected to close in late 2024 or the first half of 2025, subject to customary closing conditions and regulatory approvals.

How will Element Solutions (ESI) use the proceeds from the MacDermid Graphics Solutions sale?

Element Solutions (ESI) plans to use the net proceeds from the MacDermid Graphics Solutions sale to further reduce leverage and for general corporate purposes.