Solvay SA

M&A Activity • Nov 16, 2015

Solvay discloses unaudited pro forma financial information in connection with the intended Cytec acquisition

Brussels, November 16, 2015, 08:00 --- Solvay disclosed today unaudited pro forma consolidated financial information for the impact of the intended acquisition of Cytec.

Since the acquisition is expected to have a material impact on the financial position and results of operations of Solvay, unaudited pro forma consolidated financial information was prepared by the Group, comprising:

• Unaudited pro forma consolidated income statement and statement of comprehensive income for the year ended December 31, 2014;
• Unaudited pro forma consolidated income statement and statement of comprehensive income for the nine months ended September 30, 2015;
• Unaudited pro forma consolidated statement of financial position as of September 30, 2015.

This Unaudited Pro Forma Information is presented for illustrative purposes only. Its purpose is to show the material effects that the acquisition would have had on the historical consolidated financial statements of the Group as if it had occurred as of January 1, 2014 with respect to the unaudited pro forma consolidated income statements, and as of September 30, 2015 with respect to the unaudited pro forma consolidated statement of financial position.

The unaudited pro forma adjustments are based on available information and certain assumptions that Solvay believes are reasonable and give effect to events that are directly attributable to the acquisition and its financing and are factually supportable. In addition, the unaudited pro forma consolidated financial information does not purport to represent what Solvay's financial position or results of operations would have actually been if the acquisition and the financing had been completed on January 1, 2014 or any other date, nor does it purport to represent Solvay's results of operations for any future period or its financial condition at any future date. The unaudited pro forma consolidated financial information does not reflect any cost savings or other synergies that may result from the acquisition, nor does it reflect any special items such as restructuring and integration costs that may be incurred as a result of the acquisition.

On July 28, 2015, Solvay entered into a definitive merger agreement with U.S.-based Cytec to acquire 100% of its share capital for \$75.25 per share in cash. The merger is subject to customary closing conditions, including regulatory approvals and Cytec shareholders' approval. The transaction is expected to close before the current year end.

The Unaudited Pro Forma Consolidated Financial Information can be obtained at www.solvay.com/en/investors/news_and_results/results/20151116-pro-forma.html. This document is currently only available in English. French and Dutch translations will be made available shortly.

information under Solvay Cytec historical presentation	information under Solvay presentation converted Cytec historical into €	Purchase price allocation adjustments	accounting policies US GAAP to IFRS adjustments and alignment	Cytec pro forma financial information	Solvay historical information	Pro forma adjustments	Pro forma consolidated financial information
(in US\$ m)	(in € m)	(in € m)	(in € m)	(in € m)	(in € m)	(in € m)	(in € m)
							12,140
							416
							11,724
							(9,120)
							3,019
							(1,440)
(57)	(43)	(3)	4	(41)	(247)	-	(288)
(18)	(13)	(112)	-	(125)	(94)	-	(219)
-	-	-	-	-	(34)	-	(34)
							(419)
							619
							(226)
							37
(23)	(17)	-	-	(17)	(30)	-	(47)
							(164)
-	-	-	-	-	(1)	-	(1)
							218
							(33)
							185
							(239)
							(54)
							67
							13
312	235	9	48	291	1,783	-	2,074
	2,008 - 2,008 (1,404) 604 (299) (3) 227 (15) - - 190 (46) 144 10 154 - 154	1,511 - 1,511 (1,057) 455 (225) (2) 171 (11) - - 143 (35) 108 7 116 - 116	- - - (24) (24) (4) - (143) - - - (143) 44 (99) - (99) - (99)	- - - 30 30 14 - 48 - - (1) 47 (11) 36 - 36 - 36	1,511 - 1,511 (1,051) 460 (215) (2) 76 (11) - (1) 47 (2) 46 7 53 - 53	10,629 416 10,213 (8,070) 2,559 (1,225) (308) 652 (151) 36 (163) 343 (84) 259 (246) 13 67 80	- - - - - - (109) (109) (63) - - (172) 52 (120) - (120) - (120)

Statement of comprehensive income (IFRS) for the year ended 31/12/2014	information under Solvay Cytec historical presentation (in US\$ m)	information under Solvay presentation converted Cytec historical into € (in € m)	Purchase price allocation adjustments (in € m)	accounting policies US GAAP to IFRS adjustments and alignment (in € m)	Cytec pro forma financial information (in € m)	Solvay historical information (in € m)	Pro forma adjustments (in € m)	Pro forma consolidated financial information (in € m)
Net income	154	116	(99)	36	53	13	(120)	(54)
Hyperinflation	-	-	-	-	-	(11)	-	(11)
Available-for-sale financial assets	-	-	-	-	-	1	-	1
Cash flow hedge derivatives	-	-	-	-	-	(60)	-	(60)
Currency translation differences	-	-	-	-	-	231	-	231
Unrecognised actuarial gains and losses on defined pension plans	(4)	(3)	-	(47)	(50)	(497)	-	(547)
Income tax relating to items of other comprehensive income	1	1	-	11	12	72	-	85
Other comprehensive income, net of related tax effects	(2)	(2)	-	(36)	(37)	(264)	-	(301)
Total Comprehensive income	152	114	(99)	-	15	(251)	(120)	(355)

Income statement (IFRS) for the 9 months ended 30/09/2015	information under Solvay Cytec historical presentation	information under Solvay presentation converted Cytec historical into €	Purchase price allocation adjustments	accounting policies US GAAP to IFRS adjustments and alignment	Cytec pro forma financial information	Solvay historical information	Pro forma adjustments	Pro forma consolidated financial information
	(in US\$ m)	(in € m)	(in € m)	(in € m)	(in € m)	(in € m)	(in € m)	(in € m)
Sales	1,521	1,365	-	-	1,365	8,374	-	9,739
Revenues from non-core activities	-	-	-	-	-	338	-	338
Net sales	1,521	1,365	-	-	1,365	8,036	-	9,401
Cost of goods sold	(1,040)	(934)	(3)	14	(923)	(6,241)	-	(7,164)
Gross margin	480	431	(3)	14	442	2,133	-	2,574
Commercial & administrative costs	(198)	(177)	4	3	(170)	(985)	-	(1,155)
Research & innovation costs	(37)	(33)	-	-	(33)	(204)	-	(237)
Other operating gains & losses	(12)	(11)	(101)	-	(112)	(74)	-	(186)
Earnings from associates & joint ventures accounted for using the equity method	-	-	-	-	-	(8)	-	(8)
Non-recurring items	(6)	(5)	-	-	(5)	(126)	41	(90)
EBIT	227	204	(100)	16	120	737	41	898
Cost of borrowings	(12)	(11)	-	-	(11)	(81)	(56)	(148)
Interest on loans & short-term deposits	1	1	-	-	1	7	-	8
Other gains & losses on net indebtedness	-	-	-	-	-	(27)	-	(27)
Cost of discounting provisions	-	-	-	(2)	(2)	(66)	-	(68)
Result before taxes	216	194	(100)	15	108	570	(15)	663
Income taxes	(58)	(52)	30	(4)	(25)	(204)	20	(209)
Result from continuing operations	158	142	(70)	11	83	366	6	455
Result from discontinued operations	(1)	(1)	-	-	(1)	50	-	49
Net income	157	141	(70)	11	82	416	6	503
Non-controlling interests	-	-	-	-	-	(48)	-	(48)
Net income Solvay share	157	141	(70)	11	82	368	6	456
REBITDA	299	268	9	16	293	1,526	-	1,819

Statement of comprehensive income (IFRS) for the year ended 30/09/2015	information under Solvay Cytec historical presentation (in US\$ m)	information under Solvay presentation converted Cytec historical into € (in € m)	Purchase price allocation adjustments (in € m)	accounting policies US GAAP to IFRS adjustments and alignment (in € m)	Cytec pro forma financial information (in € m)	Solvay historical information (in € m)	Pro forma adjustments (in € m)	Pro forma consolidated financial information (in € m)
Net income	157	141	(70)	11	82	416	6	503
Hyperinflation	-	-	-	-	-	21	-	21
Available-for-sale financial assets	-	-	-	-	-	4	-	4
Cash flow hedge derivatives	-	-	-	-	-	(22)	-	(22)
Currency translation differences	-	-	-	-	-	103	-	103
Unrecognised actuarial gains and losses on defined pension plans	(2)	(2)	-	(14)	(16)	285	-	269
Income tax relating to items of other comprehensive income	1	1	-	4	5	(19)	-	(14)
Other comprehensive income, net of related tax effects	(1)	(1)	-	(10)	(12)	372	-	360
Total Comprehensive income	155	140	(70)	-	70	788	6	864

Statement of financial position (IFRS) on 30/09/2015	information under Solvay Cytec historical presentation	information under Solvay presentation converted Cytec historical into €	Purchase price allocation adjustments	accounting policies US GAAP to IFRS adjustments and alignment	Cytec pro forma financial information	Solvay historical information	Pro forma adjustments	Pro forma consolidated financial information
	(in US\$ m)	(in € m)	(in € m)	(in € m)	(in € m)	(in € m)	(in € m)	(in € m)
Non-current assets	1,933	1,726	4,519	(46)	6,198	11,985	-	18,183
Intangible assets	186	166	2,279	-	2,446	1,480	-	3,926
Goodwill	502	448	2,072	-	2,520	3,201	-	5,721
Tangible assets	1,111	991	114	-	1,106	5,623	-	6,729
Available-for-sale financial assets	-	-	-	-	-	42	-	42
Investments in joint ventures &	-	-	-	-	-	363	-	363
associates – equity method
Other investments	-	-	-	-	-	84	-	84
Deferred tax assets Loans & other non-current assets	72 63	64 56	53 -	(24) (23)	94 33	710 482	- -	804 515
Current assets	875	781	42	(29)	795	5,309	1,242	7,346
Inventories	322	288	-	-	288	1,521	-	1,808
Trade receivables	286	255	-	-	255	1,575	-	1,831
Income tax receivables	5	5	-	-	5	69	21	96
Dividends receivable	-	-	-	-	-	-	-	-
Other current receivables – Financial
instruments	6	5	-	-	5	89	-	94
Other current receivables – Other	84	75	-	(29)	47	632	(10)	669
Cash & cash equivalents	171	153	42	-	195	1,132	1,230	2,558
Assets held for sale	-	-	-	-	-	291	-	291
TOTAL ASSETS	2,808	2,507	4,561	(75)	6,993	17,294	1,242	25,529
Total equity	1,298	1,158	3,840	(32)	4,965	7,227	(2,542)	9,650
Equity Solvay share	1,298	1,158	3,840	(32)	4,965	6,957	(2,542)	9,380
Non-controlling interests	-	-	-	-	-	271	-	271
Non-current liabilities	1,160	1,036	686	(48)	1,674	5,518	3,677	10,869
Long-term provisions: employees benefits	250	223	-	-	223	2,871	-	3,094
Other long-term provisions	107	95	-	(25)	70	810	-	880
Deferred tax liabilities	35	31	674	(12)	693	368	-	1,060
Long-term financial debt	740	661	-	(5)	655	1,243	3,678	5,576
Other non-current liabilities	29	26	12	(6)	33	227	-	259
Current liabilities	350	313	36	6	354	4,549	107	5,010
Other short-term provisions	16	14	-	6	20	347	-	367
Short-term financial debt	14	13	-	-	13	1,451	-	1,464
Trade liabilities	179	160	-	-	160	1,354	-	1,514
Income tax payable	9	8	-	-	8	173	-	182
Dividends payable	-	-	-	-	-	3	-	3
Other current liabilities	132	118	36	-	154	933	107	1,194
Liabilities linked to assets held for sale	-	-	-	-	-	287	-	287
TOTAL EQUITY & LIABILITIES	2,808	2,507	4,561	(75)	6,993	17,294	1,242	25,529

Detail of equity, Solvay share (IFRS) on 30/09/2015	information under Solvay Cytec historical presentation	information under Solvay presentation converted Cytec historical into €	Purchase price allocation adjustments	accounting policies US GAAP to IFRS adjustments and alignment	Reclassifications (a)	Cytec pro forma financial information	Solvay historical information	Pro forma adjustments (b)	Pro forma consolidated financial information
	(in US\$ m)	(in € m)	(in € m)	(in € m)	(in € m)	(in € m)	(in € m)	(in € m)	(in € m)
Share capital & issue	483	431	-	-	(431)	-	1,289	1,477	2,766
Treasury shares	(960)	(857)	-	-	857	-	(231)	-	(231)
Hybrid bonds	-	-	-	-	-	-	1,194	991	2,185
Retained earnings	1,829	1,633	3,840	20	(527)	4,965	5,834	(5,011)	5,789
Currency translation	(59)	(53)	-	-	53	-	(434)	-	(434)
Cash flow hedges	-	-	-	-	-	-	(61)	-	(61)
Defined benefit pension plan	5	4	-	(53)	48	-	(635)	-	(635)
Equity attributable to equity holders	1,298	1,158	3,840	(32)	-	4,965	6,957	(2,542)	9,380

(a) Reclassification of Cytec historical positions in relation to share capital and issue premiums, treasury shares, currency translation differences and defined benefit pension plan

(b) The effect of pro forma adjustments on the equity is made of the following:

• Rights issue of € 1,500 m, net of issuance cost of € 23 m;

• Hybrid bond issue of € 1,000 m, net of issuance cost of € 9 m;

• Impacts on the Retained earnings for an amount of € (5,011) m, composed of:

• estimated acquisition costs not included in the Group historical information, net of tax, for € 40 million (€ 91 million less incurred costs of € 33 million, net of € 18 million of tax effect), and bridge loan costs not charged to the historical income statement, net of tax, for € 6 million (€ 10 million cost, net of € (4) million of tax effect), and

• elimination of the investment in Cytec for € 4,965 million.

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As an international chemical group, SOLVAY assists industries in finding and implementing ever more responsible and value-creating solutions. Solvay generates 90% of its net sales in activities where it is among the world's top three players. It serves many markets, varying from energy and the environment to automotive and aerospace or electricity and electronics, with one goal: to raise the performance of its clients and improve society's quality of life. The group is headquartered in Brussels, employs about 26,000 people in 52 countries and generated 10.2 billion euros in net sales in 2014. Solvay SA SOLB.BE) is listed on EURONEXT in Brussels and Paris (Bloomberg: SOLB.BB - Reuters: SOLB.BR).

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