Background Information on Decora Industries' Acquisition of Konrad Hornschuch AG.FORT EDWARD Fort Edward could refer to:
in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :DECO) ("Decora") announced the acquisition of Konrad Hornschuch AG ("Hornschuch") in Germany, a Frankfurt Stock Exchange Frankfurt Stock Exchange The largest of Germany's eight securities exchanges, operated by Deutsche Borse AS. listed company listed company n → compañía cotizable listed company n → société cotée en Bourse listed company list n → and one of the world's leaders in the surface covering market. Decora has acquired 73.2 percent of the shares of Hornschuch which is the first step in a planned merger of the two companies. The following is background information on both companies, their markets and the transaction. OVERVIEW Decora Industries, Inc. (Nasdaq: DECO) is the manufacturer of Con-Tact(R) paper and other branded self-adhesive decorative consumer products and is the market leader in its category in the U.S. It also has a division which sells products based on its proprietary high performance Wearlon(R) release coating technology to the specialty industrial coatings An industrial coating is a paint or coating defined by its protective, rather than its aesthetic properties, although it can provide both. The most common use of industrial coatings is for corrosion control of steel or concrete. market. In order to increase its worldwide competitive position and to increase its size and attractiveness to the equity markets, Decora has been seeking appropriate acquisition or merger alternatives. Decora's acquisition of Konrad Hornschuch AG, announced earlier today, combines the two market leaders in this decorative product category and creates a dominant worldwide competitor with significant growth opportunities. DECORA INDUSTRIES, INC. Decora, which just celebrated its 50th anniversary, is best known as the originator Originator A bank, savings and loan, or mortgage banker that initially made a mortgage loan that is part of a pool. Also, an investment bank that has worked with the issuer of a new securities offering from the beginning and is usually appointed manager of the underwriting and manufacturer of self-adhesive Con-Tact(R) brand decorative products. Since 1983, Decora's Con-Tact(R) product line has been distributed exclusively by Rubbermaid, Inc. (NYSE NYSE See: New York Stock Exchange : RBD RBD Rebelde (Mexican Novela) RBD REM (Rapid Eye Movement) Behavior Disorder RBD RNA-Binding Domain RBD Rebuild RBD Required Beginning Date (qualified retirement plans) ) and together, the companies dominate the U.S. market for self-adhesive decorative coverings. During the past few years, Decora has begun to expand its market presence internationally and in a short period of time has grown its international business to approximately 10 percent of total revenues. In order to meet the demands of international markets, Decora has also enhanced its core product line with refined products which are marketed in Europe through its strategic distribution relationship with Friedola Gebr. Holzapfel GmbH & Co. KG and throughout the rest of the world through various distribution relationships. Decora has also developed new products based on its proprietary adhesive adhesive, substance capable of sticking to surfaces of other substances and bonding them to one another. The term adhesive cement is sometimes used in place of adhesive, especially when referring to a synthetic adhesive. , release and coating technologies including the company's new thin film decorative products marketed under the trade names Decora Tile Art(TM), Decora Glass Art(TM) and Decora Wall Art(TM) and a technologically advanced line of durable release coatings sold under the Wearlon(R) brand name. After a long period of testing, Decora's Wearlon(R) high performance coating is now being used as a mold mold, name for certain multicellular organisms of the various classes of the kingdom Fungi, characteristically having bodies composed of a cottony mycelium. The colors of molds are caused by the spores, which are borne on the mycelium. release by Boeing in the production of aluminum fuselage sections and for mold release, easy-to-clean surface and other applications within the "Big Three" automotive manufacturers and Tier One automotive suppliers. Recently, Wearlon(R) was also approved as the anti-graffiti coating of choice by the Toronto, Canada Metropolitan Separate School Board's public school system. These new commercial applications have resulted from Decora's considerable investment in new product development and evaluation over the past several years. While expanding its markets and product offerings, Decora has also significantly improved its financial position, operating efficiencies and operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. , setting a solid foundation for future expansion. -0-
DECORA INDUSTRIES INC.
Summary Financial Data (US$000s)
Fiscal year Ended March 31,
1997 1996 1995
Revenues US$41,082 $38,828 $40,414
Net income 3,566 2,919 1,111
Net working capital 6,253 1,460 238
Debt/equity 1.3x 2.Ox 4.1x
In order to leverage these assets most effectively, Decora's strategy is to utilize them to execute acquisitions of companies with similar manufacturing capabilities and complementary market positions within the global marketplace. Decora believes that its acquisition of Konrad Hornschuch AG represents an example of such an acquisition opportunity that provides Decora with the ability to grow internationally, to bring new products to the domestic market and to create value through operating efficiencies between the two companies. KONRAD HORNSCHUCH AG Konrad Hornschuch AG is a major international manufacturer and marketer of self-adhesive decorative products with approximately 760 employees. A company based in Germany and listed on the Frankfurt and Stuttgart Stock Exchanges, Hornschuch is a fully integrated producer and, with the sole exception of Decora's Con-Tact(R), has the highest worldwide brand recognition for its "d-c-fix" and "Noblessa" lines of self-adhesive products. In addition to its strong market presence in Europe, Hornschuch has significant product sales and distribution capabilities in Eastern Europe Eastern Europe The countries of eastern Europe, especially those that were allied with the USSR in the Warsaw Pact, which was established in 1955 and dissolved in 1991. , Russia, the Middle East and the Far East. Decora's market coverage is very complementary to Hornschuch's with its dominance of the North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. market and greater sales strength in South America South America, fourth largest continent (1991 est. pop. 299,150,000), c.6,880,000 sq mi (17,819,000 sq km), the southern of the two continents of the Western Hemisphere. as well as sales to different distribution channels in the Far East. Hornschuch's self-adhesive products are very similar to Decora's core product offering and, along with its self-adhesive coverings, Hornschuch markets a full line of complementary table coverings and other decorative kitchen and table oriented o·ri·ent n. 1. Orient The countries of Asia, especially of eastern Asia. 2. a. The luster characteristic of a pearl of high quality. b. A pearl having exceptional luster. 3. products. Hornschuch's consumer decorative products represented approximately 52 percent of Hornschuch's revenues during the fiscal year ended December 31, 1996. In recent years, Hornschuch also expanded its business beyond consumer products through the manufacture of decorative and functional films for use by OEMs in the automotive, building, furniture and interior decoration interior decoration, adornment of the interior of a building, public or domestic, comprising interior architecture, finishing, and furnishings. Asian and classical cultures used the decorative arts to create elaborate interiors, and they originated forms extensively markets. The company also manufactures synthetic decorative films and substrates for OEMs in the shoe, handbag and upholstery upholstery, general term for household fittings, hangings, curtains, cushions, and covers. It refers to stuffed, padded, and spring-cushioned furniture, such as chairs and sofas, or to the usually decorative materials and fabrics that cover them. industries. Significant investment, under-utilized capacity and high labor content contributed to deteriorating de·te·ri·o·rate v. de·te·ri·o·rat·ed, de·te·ri·o·rat·ing, de·te·ri·o·rates v.tr. To diminish or impair in quality, character, or value: financial performance at Hornschuch which resulted in the establishment of a new management team two years ago. KONRAD HORNSCHUCH AG (DM in millions) FY Ended 12/31, 1996 1995 1994 Revenues DM 202.04 189.16 184.19 Net income before dividend (0.76) (9.50) 2.19 Source: Dow (Direct OverWrite) See magneto-optic disk. Jones/Worldscope Changes have been made by Hornschuch's new management team to reverse this trend. More significantly, its markets and processes are essentially the same as Decora's and additional opportunities exist to improve the operations of Hornschuch and to create further value through synergies in the combination with Decora. ACQUISITION BENEFITS The acquisition of Hornschuch presents opportunities for growth and value creation on many levels including both operating efficiencies and product/market growth. The potentials for such efficiencies and opportunities exist in each of the following areas: -- Markets/customers/products distribution -- Manufacturing efficiencies/capacity utilization -- Raw material purchasing power/vertical integration -- R&D/product development -- Overhead efficiencies With the acquisition of Hornschuch, Decora becomes the worldwide market leader and believes that it has the opportunity to achieve an increased market position worldwide and be poised to take advantage of the significant demand for self-adhesive decorative coverings which is anticipated to come from developing countries over the next 5-10 years. In North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. and Europe, the self-adhesive decorative covering market grew significantly during the 1950s and 1960s post-war boom when low-cost decorative alternatives were desired by a growing consumer base. As residents of developing countries begin to achieve a similar stage, the growth prospects for these products appears to be significant. Decora believes that the combined potential for growth in emerging and developed markets may result in a significant expansion of market size over the next few years. Decora and Hornschuch each have products which can be expanded into the other company's markets. For example, Hornschuch produces a product line which Decora will immediately take into the U.S. DIY DIY abbr. do-it-yourself DIY or d.i.y. Brit, Austral & NZ do-it-yourself DIY abbr DIY do it yourself a DIY shop/job. ("do it yourself") marketplace while Hornschuch will leverage Decora's new thin film products through its international distribution channels. Additionally, Decora's Wearlon(R) techno-logy can be used to enhance the performance of Hornschuch's consumer and industrial film products thereby opening new market opportunities. Decora believes that these are just some of the opportunities which exist to create value with the combination of the two companies. Additional opportunities may exist in the areas of product design, purchasing power Purchasing Power 1. The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing power is important because, all else being equal, inflation decreases the amount of goods or services you'd be able to purchase. 2. and administration that have the potential to further enhance the profitability of the combined company. THE TRANSACTION Decora has acquired 73.2 percent of the shares of Hornschuch which is the first step in a planned merger of the two companies. Decora will undertake to complete a tender offer for the remaining shares for the purpose of total merger within the next 18 months. As a result of this acquisition, Decora Industries, Inc. will become the world-wide leader in the manufacturing and marketing of consumer self-adhesive decorative products. Decora's revenues for the fiscal year ended March 31, 1997 were US$41.1 million. Konrad Hornschuch's consolidated revenues for the year ended December 31, 1996 were DM 202 million, or about US$115 million. Decora's purchase of 73.2 percent of the outstanding shares of Hornschuch resulted from privately negotiated transactions with Hornschuch's two largest shareholders, as well as a non-competition agreement from Hornschuch's largest shareholder. Lazard & Co. GmbH of Frankfurt, Germany represented Decora in the negotiations. Consideration for the purchase was DM 61.6 million or approximately US$35.2 million in cash which was funded with a combination of US$20.1 million of senior debt provided by Dresdner Bank Dresdner Bank AG is one of Germany's largest banking corporations and is based in Frankfurt. History 19th century Dresdner Bank was established on 12 November 1872 through the conversion of financial institution Michael Kaskel. and US$15.1 million of subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". from a fund managed by Dorrance Street Capital Advisors, L.L.C. The subordinated debt includes warrants to purchase approximately 9.1 million common shares of Decora Industries, Inc., subject to certain anti-dilution provisions Anti-Dilution Provision A provision in an option or a convertible security. It protects an investor from dilution resulting from later issues of stock at a lower price than the investor originally paid. , at an exercise price of US$1.00 per share. Decora intends to immediately purchase an additional 11,800 shares of Hornschuch in the open market in order to achieve voting control of 75 percent and subsequently will tender for the remaining shares of Hornschuch within the next 18 months. The acquisition was consummated con·sum·mate tr.v. con·sum·mat·ed, con·sum·mat·ing, con·sum·mates 1. a. To bring to completion or fruition; conclude: consummate a business transaction. b. on October 1, 1997 and will be treated by Decora Industries, Inc. as purchase accounting. It will be included in Decora's financial results beginning with the quarter ending December 31, 1997. Commenting on the transaction, Nathan Hevrony, Decora's Chairman and Chief Executive Officer stated: "The acquisition of Konrad Hornschuch AG is an excellent strategic fit with Decora's growth strategy of expanding its competitive position in the world-wide self adhesive decorative products marketplace. Decora's market coverage is very complementary to Hornschuch's with our dominance of the North American market and international sales in different markets and channels. Additionally, we have identified certain manufacturing synergies which have significant cost savings potential. The combination of Decora and Hornschuch should enhance our competitive position in all markets served to the benefit of all our customers and shareholders worldwide." ABOUT DECORA INDUSTRIES, INC. Decora Industries Inc. is engaged in the development, manufacturing and sales world-wide of consumer decorative products and of specialty industrial products, utilizing its proprietary pressure-sensitive, self-adhesive, release and protective coatings technologies, which includes Decora's proprietary Wearlon. release coating systems. -0- Note to Editors: Decora Industries, Inc. will conduct a conference call next week for the investment community to discuss Decora's acquisition of Konrad Hornschuch AG. The date and time of the conference call will be announced. Information about Decora Industries, Inc. is available on Decora's World Wide Web site on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the located at http://www.decoraind.com. Statements included within this press release which are not historical in nature constitute forward looking statements for the purposes of the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provided by the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Investors are cautioned that such statements involve uncertainties regarding actual results which could differ from those described herein. These factors include fluctuation Fluctuation A price or interest rate change. in further product penetration to new markets or in fluctuation in core product sales. Careful consideration should be given to cautionary statements made in the Company's most recently filed SEC documents, in particular the Company's 10-K and 10-Qs. CONTACT: Decora Industries, Inc. Timothy N. Burditt, (518) 747-6255 or Kehoe, White, Savage & Company, Inc. Van Negris / John P. Kehoe (212) 888-1616 |
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