Luxfer to acquire Oaktree Capital controlled Neo Performance Materials for US $612M

Luxfer Holdings PLC (NYSE: LXFR) has entered into a definitive agreement to acquire Neo Performance Materials Inc. (TSX: NEO) in a cash-and-share deal valued at US $612 million.

Upon completion of the transaction, shareholders of Neo Performance Materials will receive US$5.98 in cash and 0.395 Luxfer shares for each common share of Neo Performance Materials. Post-transaction, current Luxfer shareholders will own approximately 63% of the combined company on a pro forma basis.

With corporate offices in Colorado and Beijing, Toronto based Neo Performance Materials is a global leader in the innovation and manufacturing of rare earth and rare metal‐based functional materials. Luxfor said the Neo acquisition will accelerate its strategy to become a leading global manufacturer of highly‐engineered advanced materials for high end applications.

Oaktree Capital Management, L.P., which indirectly controls 64.6% of Neo outstanding common shares, has agreed to support the transaction. Upon closing of the transaction, Oaktree will own approximately 24% of Luxfer ordinary shares outstanding.

The transaction is expected to be completed during the second quarter of 2019.

photo credit: Neo Performance Materials

News Release

Luxfer Holdings to Acquire Neo Performance Materials

Creates a US$947 million revenue global manufacturer of highly‐engineered advanced materials.
Accretive transaction extends Luxfer’s reach in higher growth end‐markets and geographies.

MANCHESTER, UK, and TORONTO, CA – December 18, 2018 — (CNW) – Luxfer Holdings PLC (NYSE: LXFR) (“Luxfer”) and Neo Performance Materials Inc. (TSX: NEO) (“Neo Performance Materials” or “Neo”) today announced the signing of a definitive agreement under which Luxfer would acquire Neo Performance Materials for US$612 million* in cash and stock. The transaction accelerates Luxfer’s strategy to become a leading global manufacturer of highly‐engineered advanced materials for high end applications. Completion of the transaction, which was unanimously approved by each company’s Board of Directors, is subject to shareholder approval for each company and customary regulatory clearances and closing conditions.

Headquartered in Toronto, with corporate offices in Colorado and Beijing, Neo Performance Materials is a global leader in the innovation and manufacturing of rare earth and rare metal‐based functional materials used in many of today’s advanced technologies. Neo has reported sales of US$454 million and Adjusted EBITDA of US$69 million for the twelve months ended September 30, 2018. Neo’s operating model has generated high free cash flow conversion with strong margins and low capital expenditures. In addition, there is significant additional capacity within their nine manufacturing facilities to support growth.

Transaction Rationale

The acquisition of Neo accomplishes several strategic goals toward enhancing shareholder value. The addition of Neo:
 Complements Luxfer’s current product portfolio of high‐performance engineered materials with high‐value rare‐earth and rare metal based proprietary products, processes and technologies;
 Expands Luxfer’s access to high‐growth Asian markets, diversifying its customer base and creating a more direct path to procure raw materials;
 Creates cross‐selling opportunities across both companies’ customers and geographies;
 Positions Luxfer to better serve its customers in rare‐earth chemicals and oxides, including zirconium‐based chemicals, for critical applications; and
 Immediately adds to Luxfer’s earnings per share.

“Neo Performance Materials significantly enhances our global leadership in the innovation and manufacturing of rare earth and rare metal‐based functional materials, which are essential inputs to high‐growth, future‐facing industries,” stated Alok Maskara, Chief Executive Officer of Luxfer. “Neo’s Magnequench segment is an industry leader in rare‐earth powders used to manufacture magnets for performance micro motors and other critical applications, while the Chemicals and Oxides segment complements Luxfer’s own zirconium‐based chemicals business. We warmly welcome Neo Performance Materials’ skilled employees and leadership and look forward to establishing a common highperformance culture focused on meeting the needs of our customers.”

Geoff Bedford, Chief Executive Officer of Neo Performance Materials, said, “The combination of Luxfer and Neo creates a global leader of highly engineered, advanced materials which are critical to many of today’s macro global trends including those promoting energy efficiency and environmental sustainability. Luxfer’s strategy is complementary to Neo’s in that we both have focused on deep customer relationships, strong product development capabilities, cost‐competitive manufacturing and global reach, which has allowed us to uniquely position ourselves in our respective markets. This combination will enable our businesses to reach the next level as an important part of a larger, more diversified company. We look forward to this transaction and believe our employees, partners, shareholders, and customers around the world will benefit greatly as a result.”

Transaction Details and Synergies

The transaction will be effected via a Plan of Arrangement pursuant to section 182 of Business Corporation Act (Ontario). Upon completion of the transaction, shareholders of Neo Performance Materials will receive US$5.98 in cash and 0.395 Luxfer shares for each common share of Neo Performance Materials. Post transaction, current Luxfer shareholders will own approximately 63% of the combined company on a pro forma basis.

Luxfer has arranged US$375 million in committed financing in a syndicated term loan B to fund the cash portion of the purchase price, fees and expenses, and refinance existing debt.

The transaction is expected to realize at least US$15 million of cost synergies, largely from the elimination of duplicative public company costs and sourcing benefits from vertical integration of rare earths. In addition, integration of Luxfer’s zirconium chemicals business with Neo’s Chemicals and Oxides unit is expected to lead to growth synergies.

The two largest shareholders of Neo, which are affiliates of Oaktree Capital Management, L.P., have entered into a voting and support agreement for the transaction, which includes an agreement to sign a lock‐up for the newly issued Luxfer shares upon closing. Members of the Boards of Directors of Luxfer and Neo have also entered into voting support agreements for the transaction. At close of the transaction, Oaktree will own approximately 24% of Luxfer ordinary shares outstanding. Upon closing, it is anticipated that some members of the current Neo Board of Directors will join Luxfer’s Board. The transaction is expected to be completed during the second quarter of 2019, following regulatory clearances, shareholder approvals and satisfaction of closing conditions.

Pro forma Financial Performance

On a pro forma basis, the combined entity had US$947M million in revenue and Adjusted EBITDA of US$148 million on a trailing twelve‐month basis. Also, the combined company will continue to benefit from a strong balance sheet, with modest pro forma net leverage of approximately 2.0x.

Luxfer will provide forward‐looking guidance for the combined company upon closing of the transaction and expects to maintain its target of 8‐10% increases in EBITDA annually through continued internal performance improvements, deal‐related synergies and revenue growth.

Jefferies Group LLC acted as exclusive financial advisor to Luxfer, while Barclays Capital Canada Inc. acted as financial advisor to Neo.

Investor Conference Call
Luxfer will hold an investor conference call with its senior management today, Tuesday, December 18, 2018 at 8:30 am ET, with the following dial‐in details:
 USA: (877) 341‐8545
 International: (908) 982‐4601
Confirmation Code: 3579545
Webcast Link: https://event.webcasts.com/starthere.jsp?ei=1224704&tp_key=17bcf1c410

A replay of the conference call will be available until December 24, 2018 at:
 USA: (800) 585‐8367
 International: (404) 537‐3406
Confirmation Code: 3579545

About Luxfer Holdings PLC
Luxfer is a global manufacturer of highly‐engineered advanced materials, which focuses on value creation by using its broad array of technical know how and proprietary technologies. Luxfer’s high performance materials, components, and high‐pressure gas containment devices are used in defense and emergency response, healthcare, transportation, and general industrial settings. For more information, visit www.luxfer.com. Luxfer is listed on the New York Stock Exchange and its ordinary shares trade under the symbol LXFR.

About Neo Performance Materials

Neo Performance Materials is a global leader in the innovation and manufacturing of rare earth and rare metal‐based functional materials, which are essential inputs to high technology, high growth, future acing industries. The business of Neo Performance Materials is organized along three segments: Magnequench, Chemicals & Oxides and Rare Metals. Neo Performance Materials is headquartered in Toronto, Canada with corporate offices in Greenwood Village, Colorado, and Beijing, China. Neo Performance Materials operates globally with sales and production across 10 countries, being Japan, China, Thailand, Estonia, Singapore, Germany, United Kingdom, Canada, United States and South Korea. For more information, please visit www.neomaterials.com. Neo Performance Materials is listed on the Toronto Stock Exchange and its common shares trade under the symbol NEO.

*Note: Transaction value based on share price at close of business on December 14, 2018.

Luxfer Investor Contact:
Douglas A. Fox, CFA
Director, Investor Relations
Cassandra Stanford
Communications Specialist
+1 951‐341‐2375
Investor.relations@luxfer.com

Neo Investor Contact:
Ali Mahdavi
Investor Relations
(416) 962‐3300
Email: ir@neomaterials.com

Ted Liu

Ted Liu, M.Sc. (Mining, Queen's), MBA (Finance, Toronto), is the Editor of Private Capital Journal, CanadaMetals.ca, TechWire.ca, and the former Editor of Canadian Private Equity. Ted has been passionately tracking Canadian private capital industry since 1992, having most recently served as Research Director for The Canadian Venture Capital and Private Equity Association (CVCA).

Ted is the architect of CVCA infobase, and is the architect of CPE Media's Financings.ca, Canada's most sophisticated and advanced all private capital and public market financing database.