Cytec to buy Surface Specialties Business of UCB for $1.8 billion

Among advantages of acquisition, it: Broadens existing coatings product line consistent with Cytec strategy; provides leadership position in environmentally friendly products; positions it well for accelerated growth in global coatings market. Transaction expected to add to growth within 12 months...

WEST PATERSON, NJ, Oct. 1, 2004 (BUSINESS WIRE) -- Cytec Industries Inc. signed a definitive agreement to purchase the Surface Specialties business of UCB Group, a leading Belgium biopharmaceutical and specialty chemical company, for cash and stock valued at 1.5 billion euros or US$1.8 billion (1 euro = US$1.20).

The acquisition, approved by the board of both companies, is subject to customary closing conditions including approval of regulatory authorities -- and is expected to close by Dec. 31.

The cost of the acquisition will be paid 1,275 million euros in cash and 5,772,857 shares of Cytec common stock valued at 225 million euros. It's anticipated the cash portion of the transaction will be financed with a new credit facility, a bridge loan, which the company intends to refinance with long term debt, and existing cash.

Upon closing, UCB will own approximately 12% of the outstanding shares of Cytec. UCB and Cytec have also agreed to enter into a stockholders agreement which will provide for UCB to reduce its stake within 5 years and contain other customary terms and provisions.

The addition of the global Surface Specialties business, with 2003 revenues of $1.2 billion will create a combined Cytec entity of approximately $2.7 billion based on 2003 revenues. The acquisition will complement Cytec's existing product lines in the Performance Products segment by significantly increasing Cytec's product offering to the coatings and additives industries including the general industrial, automotive, architectural, plastic, graphic arts and wood segments. Many of the Surface Specialties product lines such as UV Cure, Powder and waterborne systems have above average growth rates.

David Lilley, chairman, president and CEO commented, "The acquisition of UCB's Surface Specialties business will provide us critical mass and an excellent position to service the coatings markets with a broad range of resins and additives as well as technical resins serving a wide range of other target markets. The strong technology foundation positions us with a sustainable platform with above average growth rates in the coatings markets."

Georges Jacobs, chairman of the UCB Executive Committee said, "The management and employees of Surface Specialties, who have been significant contributors to the development of the UCB Group, will benefit from being part of a global specialty chemicals and materials company fully committed to the further development of its core businesses. I would like to pay tribute to everyone involved in Surface Specialties for their competences, loyalty and dedication and to thank them for the valuable contribution they have made to the evolution of UCB. We have complete confidence in their future within Cytec and wish them every success."

Cytec intends to operate the Surface Specialties business as a separate segment and will integrate its Coating and Specialty Additives and Performance Chemicals product lines into the new segment.

Lilley said, "The diverse customer base is highly complementary to our existing customer base and this acquisition will expand our geographic presence for manufacturing operations and R&D facilities, particularly in Europe, Asia and Latin America. Similar to Cytec, Surface Specialties is led by a dedicated and focused management team with a clear emphasis on providing the customer with valued technology. Upon closing, it is anticipated that Ben Van Assche, currently director-general of Surface Specialties, will be named president of Cytec Surface Specialties and will be elected an officer of Cytec and a member of its executive committee. Cytec Surface Specialties will be headquartered in Brussels, Belgium."

Lilley added, "The remaining product line in our Performance Products segment, Polymer Additives, will be combined with our Water and Industrial Process Chemicals segment. This specialty chemicals segment, which includes our Water Treatment, Mining and Phosphine Chemicals product lines and now Polymer Additives, will be renamed Cytec Performance Specialties. Shane Fleming, president, Cytec Performance Specialties and his strong management team will continue their focus on delivering earnings growth through value added products, geographic expansion and operational excellence."

In conjunction with this transaction, Cytec anticipates divesting Surface Specialties' amino resin product line during 2005 and using the proceeds to reduce debt. Sales of Surface Specialties' amino crosslinkers in 2003 were approximately $140 million.
Excluding transaction costs, integration costs and non-cash purchase accounting adjustments, Cytec expects the acquisition to be immediately accretive to cash flow and earnings per share.

James P. Cronin, executive vice president and CFO commented, "The combined entity is expected to continue to have strong cash flow that will be used to support the growth opportunities for our businesses, pay down debt and maintain our dividend. Our stock buyback program will be suspended for up to two years. Concerning synergies, we anticipate them to come from savings in raw materials and other consolidation opportunities. We expect to complete them no later than 18 months from the closing date."

Lilley added, "Cytec entered into this transaction with a strong group of businesses and dedicated employees. After completing this transaction, we will have enhanced our business portfolio by broadening our leadership position in the large global coatings market. This acquisition expands our technology base and our geographic capabilities and the ability to support our customers even further through value added products and services. We are excited about the possibilities this acquisition will bring to Cytec thus increasing returns to our shareholders."

About Cytec
Cytec Industries is a specialty chemicals and materials technology company with sales in 2003 of $1.5 billion. Its growth strategies are based on developing technologically advanced customer solutions for global markets including: aerospace, plastics, industrial coatings, mining, and water treatment.

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