Materion to Acquire HC Starck’s Electronic Materials Portfolio, Creating a Global Leader in Premium Thin-Film Materials for the Semiconductor Market

MAYFIELD HEIGHTS, Ohio–()–Materion Corporation (NYSE: MTRN), a global leader in advanced, high-performance materials, today announced that it has reached an agreement to acquire the advanced electronic materials business of HC Starck Solutions, located in Newton, Massachusetts. (HCS -Electronic material). HCS-Electronic Materials uses proprietary technology and extensive materials science know-how to provide high-end tantalum and niobium-based products and services for the semiconductor, industrial, aerospace and defence.

HCS-Electronic Materials is a leading supplier of high-quality, high-purity tantalum sputtering targets important in the manufacture of today’s advanced semiconductor chips. Building on Materion’s existing portfolio of high-end electronic materials and thin-film target solutions, the acquisition will significantly strengthen the company’s position as a leading supplier to the high-growth semiconductor industry. HCS-Electronic Materials adds advanced manufacturing processes and technical capabilities to meet the rapidly changing technology challenges involved in delivering today’s most advanced chip architectures and important applications to industry markets. , aerospace and defense.

HCS-Electronic Materials is expected to generate revenues of approximately $145 million in 2021, adding more than 19% to value-added sales, and Adjusted EBITDA of approximately $29 million, representing an Adjusted EBITDA margin by about 20%. The addition is expected to be immediately accretive to Materion’s adjusted EBITDA margin by 100 basis points. The purchase price of $380 million reflects an estimated 2021 Adjusted EBITDA multiple of approximately 13x before synergies, and an estimated Adjusted EBITDA multiple of approximately 10x including interest rate synergies. projected execution. After closing of the transaction, HCS-Electronic Materials will become part of Materion’s Advanced Materials segment.

“HCS-Electronic Materials is a highly strategic and transformative acquisition that builds on our strong position in the semiconductor industry and supports our goals of above-market growth, margin expansion and consistent EPS growth at double digits,” said Jugal, president and CEO of Materion. said Vijayvargiya. “HCS-Electronic Materials’ cutting-edge technology expands our global reach and broadens our product offering to leading semiconductor chip manufacturers, as well as important industrial, aerospace and defense. We are excited about the opportunities ahead and look forward to welcoming the 140 highly skilled HCS-Electronic Materials team members to Materion.

The combination has compelling strategic and financial advantages:

  • Increases access to the high-growth semiconductor market and alignment with megatrends: Deepens alignment with the world’s leading semiconductor manufacturers and further strengthens our position to benefit from key megatrends, in particular the proliferation of smart devices, high-speed (5G) connectivity, autonomous driving, artificial intelligence and cloud computing
  • Creates significant end-market scale and increases the total addressable market: Expands Materion’s presence in the semiconductor industry, increasing sales contribution by more than 40%, providing access to new, higher value chip applications, and significantly increasing the total addressable market opportunity in the space
  • Expands portfolio and expands reach: Adds new advanced materials to the portfolio, increases sales contribution outside of the United States, creates geographic advantage aligned with evolving semiconductor manufacturing trends, and strengthens established positions in industry markets, aerospace and defense
  • Adds proprietary process technology and key talent: Adds a center of excellence with proprietary process technologies that produce highly differentiated solutions and brings deep technical expertise and seasoned talent
  • Improves the financial profile: The transaction is expected to be immediately accretive to Adjusted EPS and Adjusted EBITDA margins of Materion by 100 basis points, and expected to increase annual value-added sales by more than 19%; in addition, the company expects synergies to contribute significantly to EBITDA; target approximately $10 million by 2026

“The addition of HCS-Electronic Materials significantly enhances Materion’s portfolio of advanced materials solutions and is a great example of how we are leveraging our strong financial position to acquire proven businesses that align with our growth strategy. growth. We remain focused on deepening and broadening our technical capabilities, adding greater diversification and increasing our access to attractive higher growth, higher margin business opportunities,” said Vijayvargiya.

The acquisition of HCS-Electronic Materials builds on Materion’s acquisition of Optics Balzers in 2020, which expanded the company’s global position in thin-film optical coatings, continuing its transformation into a leading provider of advanced materials.

Trading conditions and financing

The acquisition of HCS-Electronic Materials is structured as a stock purchase.

Materion plans to finance the transaction using a new term loan as well as borrowings from its revolving credit agreement. Pro forma net debt to adjusted EBITDA is expected to be approximately 2.9x at closing, within the company’s reported target leverage range of 1.5x to 3.0x. Materion expects to generate strong cash flow and deploy it towards mid-range deleveraging within 24 months of closing.

The transaction is expected to close in the fourth quarter of 2021, subject to customary closing conditions, including regulatory approval.

JP Morgan is Materion’s exclusive financial advisor and Jones Day is legal advisor.

Conference Call and Webcast Information

Materion Corporation will hold a conference call today, September 20 at 11:00 a.m. EST to discuss the acquisition of HCS-Electronic Materials. Investors wishing to participate in the call should dial 1-877-407-0788 approximately 10 minutes prior to the start of the call. Callers outside the United States can dial (201) 689-8565. A replay of the call will be available until October 4and, 2021 by dialing (877) 481-4010 or (919) 882-2331; please quote review ID number 42893. The call will also be archived on the Company’s website.

About Materion

Materion Corporation is headquartered in Mayfield Heights, Ohio. Materion, through its wholly owned subsidiaries, provides advanced, high-tech enabler materials to global markets. Products include specialty precious and non-precious metals, inorganic chemicals and powders, specialty coatings, specialty beryllium alloys, beryllium and beryllium composites, and coated and plated metal systems.

About HC Starck Solutions

Privately held HC Starck Solutions is one of the world’s leading suppliers of refractory metal powders and, with core competencies in tantalum and niobium, supplies growing industries such as semiconductors, industrial, aerospace and defence. The company, owned by Advent International and The Carlyle Group, operates six manufacturing sites in North America, Europe and China and employs more than 470 people.

FORWARD-LOOKING STATEMENTS

The portions of the narrative set forth herein that are not statements of historical or current fact are forward-looking statements. Our actual future performance may differ materially from that contemplated by the forward-looking statements due to a variety of factors. These factors include, in addition to those mentioned elsewhere in this document: our ability to successfully complete the acquisition of HCS-Electronic Materials; our ability to achieve strategic and other objectives related to the proposed acquisition of HCS-Electronic Materials, including expected synergies; our ability to successfully integrate the HCS-Electronic Materials business and other similar acquisitions and achieve the expected results of the acquisition, the ultimate impact of the COVID-19 pandemic on our business, results of operations , our financial condition and liquidity; the global economy, including the impact of tariffs and trade agreements; the state of the markets we serve, whether defined geographically or by segment; changes in the product mix and financial condition of customers; our success in developing and introducing new products and rates of new product ramp-up; our success in passing raw material costs to customers or mitigating fluctuating prices for such materials, including the impact of fluctuating prices on the value of inventory; our success in implementing our strategic plans and the timely and successful completion and start-up of any capital projects; other financial and economic factors, including the cost and availability of raw materials (base and precious metals), physical inventory valuations, metal financing costs, tax rates, foreign exchange rates, interest rates, pension expense and required cash contributions and other employee benefit costs, energy costs, regulatory compliance costs, insurance cost and availability, credit availability and l impact of Materion’s share price on the cost of incentive compensation plans; uncertainties related to the impact of war, terrorist activity and natural disasters; changes in governmental regulatory requirements and the enactment of new laws that impact our obligations and operations; the conclusion of pending litigation consistent with our expectation that there will be no material adverse effects; disruptions to operations and other effects of catastrophic and other extraordinary events, including the COVID-19 pandemic; and the risk factors set forth in Part 1, Item 1A of our 2020 Annual Report on Form 10-K.

Materion Corporation is headquartered in Mayfield Heights, Ohio. Materion, through its wholly owned subsidiaries, provides advanced, high-tech enabler materials to global markets. Products include specialty precious and non-precious metals, inorganic chemicals and powders, specialty coatings, specialty beryllium alloys, beryllium and beryllium composites, and coated and plated metal systems.

Darcy J. Skinner