(ROC) Rockwood Holdings Agrees to Buy Talison

Specialty and advanced materials company Rockwood Holdings Inc. (ROC) entered into an agreement  to buy Talison Lithium Limited for C$724 million ($729 million) to boost  the production of lithium used in batteries and smartphones.

The deal is, however, subject to the approval of Talison shareholders and other customary closing conditions.

Rockwood believes that the acquisition will help expand its lithium business and enable it to better serve its existing customers as well as Talison’s customers in China and rest of the world. Talison is a leading global producer of lithium, and supplies its customer network from the Greenbushes Lithium Operations in Western Australia.

Rockwood plans to finance the acquisition using its cash in hand and new debt. Lazard will act as an exclusive financial adviser to Rockwood, and Gilbert & Tobin will be its legal counsel.

Earlier this month, Rockwood released its second quarter financial results for 2012. Adjusted earnings of $1.17 per share lagged both the Zacks Consensus Estimate of $1.19 and the year-ago quarter earnings of $1.19.

Reported profit more than doubled to $224.9 million or $2.81 per share in the quarter from $94.5 million or $1.11 a year ago, primarily driven by an income tax benefit of $139 million.

Revenues declined 9.4% year over year to $905.6 million, due to a negative currency translation of $75.1 million. It failed to meet the Zacks Consensus Estimate of $987 million. A major portion of Rockwood’s net sales and cost of products sold are determined in euros and thus any unfavorable currency fluctuation can affect the company’s top line.

The company’s lithium, surface treatment and advanced ceramics businesses improved on a year-over-year basis, excluding negative currency effects. Its lithium business improved on the back of higher selling prices and increased volumes of lithium battery products, partially offset by currency changes and lower volumes of butyllithium in Asia.

Rockwood, which competes with PPG Industries, Inc (PPG), Cabot Corporation (CBT) and Sigma Aldrich Corporation (SIAL), currently retains a Zacks #4 Rank, reflecting a short-term (1 to 3 months) Sell rating.

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