SOLVAY IN ACTION - NOVEMBER 2015

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Dear Shareholders

We publish this month a special issue of SOLVAY IN ACTION to update you on the Cytec acquisition, shortly after the Extraordinary General Meeting of November 17. 

This is an opportunity to review the approval by a majority of our shareholders of the capital increase announced at the end of July 2015, and which will serve, together with the issuing of hybrid and other bonds, to finance the acquisition of Cytec.

In this issue, we also zoom in on Cytec itself: its profile, its operations and its assets in the context of a merger with Solvay. We also focus on the aviation market, where Cytec has a leader position in composite materials to provide expertise to Solvay.  
We hope you’ll enjoy this issue.

The Investor Relations team

Approval & Completion of the capital increase linked to the acquisition of Cytec

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JPC

CEO Jean-Pierre Clamadieu comments on the outcome of the recent General Meeting and reviews the strategic logic of the Cytec acquisition : 

The Extraordinary General Meeting on November 17 approved by an overwhelming majority the resolution to authorize a capital increase of up to 1.5 billion euros announced along with the intended Cytec acquisition at the end of July 2015. This demonstrates our shareholders' confidence in the strategic rationale of this acquisition and in the strong growth potential and sustainable value creation.


A decisive step-change in the Group's transformation 

Following the merger with Rhodia in 2011, Solvay has set in motion a change in its activity portfolio by means of external acquisitions and sales of activities. Today, the Cytec merger is a step-change in Solvay's transformation, strengthening its presence in activity domains with high added value and resilience, and improving its geographic exposure

With the transaction expected to close by year-end, our goal is to be fully operational from day one. For several months already, 200 Solvay and Cytec people have been working together and doing everything possible to make sure that, when the time comes, we can integrate our activities quickly and efficiently. Based on our synergies and our innovations, we will have more solutions to help customers meet the challenges of a more sustainable development, while improving the Group's growth dynamic and its value creation. 

Cytec: more growth, less cyclicality, greater profitability 

The operation aims to propel Solvay into the world number two position in composite materials for the aircraft industry, to accelerate the growth of its Advanced Materials platform in this market, and to strengthen its position in specialty formulations through Cytec’s very strong technical expertise for the mining industry. More generally, Cytec allows us to take a big step forward in offering sustainable solutions to our customers, to become the key player in lightweighting materials and in so doing strengthen our CO2reduction strategy

This strategic alignment is excellent for Solvay as both companies share the same vision and have strong synergies. The integration of Cytec will enhance the Group's profile in terms of its growth capacity and its resilience (via entering the aerospace market and its stronger presence in North America), and also its profitability. 

The launch of the capital increase 

SOLVAC, which holds over 30% of Solvay, has announced its support and has confirmed its willingness to participate in the transaction and the capital increase with preferential subscription rights. This is the sign of a profound confidence in the evolution of the Group's positioning, in its development strategy, and its ability to create greater value through the merger with Cytec.

The many investors we have met in recent weeks are very positive on the strategic rationale, the complementarity of the two groups and the benefits Solvay can draw from such a partnership. This is particularly true of American investors who are familiar with Cytec and appreciate the quality of this company. We will work to deliver the objectives announced to the market in terms of earnings growth, cash generation and return for shareholders. This is what we will be working on to achieve as soon as the acquisition is closed and the integration process has started.

We just successfully launched a hybrid and other bonds issue of more than 2 billion euros. The next step will be the decision of the Board of Directors to launch the operation. They will decide in due course on the conditions and appropriate timing, in the interest of the Group and its shareholders. We are strongly counting on your support once the operation is launched. In this way you will be able to participate in the new prospects for our Group's growth and sustainable value creation.

Completion of the transaction

Solvay announced on December 17 the finalization of the financing of its acquisition of U.S.-based Cytec. This acquisition will significantly boost Solvay’s portfolio of advanced materials with lightweighting solutions for the aerospace and automotive industries, and will furthermore strengthen its formulations know-how in mining chemicals.
“We accomplished the acquisition and financing of Cytec in less than five months and are forging ahead with the integration of its businesses and teams into the Group’s fully operational new structure. Cytec represents a step-change in Solvay's transformation, which will reinforce our innovation capabilities and our strong earnings growth momentum into 2016 and beyond.” said Jean-Pierre Clamadieu, CEO of Solvay.


Cytec's ID card

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Cytec is a first line supplier of specialty materials and technologies for a wide range of applications, from chemicals for the mining industry to industrial materials to advanced composite materials for aerospace. The company has four main business units: Aerospace Materials, Industrial Materials, In Process Separation and Additive Technologies. 

In the fast-growing composite materials sector, accounting for two-thirds of sales, Cytec serves primarily the aerospace market and is developing new solutions for the automotive sector. Cytec is also the world leader in formulations which improve mineral separation processes.


Innovation, the group's DNA

Cytec is recognized by customers for its high-performance solutions with added value, and for its capacity to innovate. Cytec seeks to provide customers with environmental friendly solutions: by developing lightweighting materials for vehicle structures, it reduces CO2emissions and the development of more effective and cleaner mineral separation technologies permits responsible resource management. Lightweighting materials in aircraft in particular is a key factor in the drive to reduce the CO2footprint. With the Cytec acquisition, Solvay takes a big leap forward in composite technology and access to the aeronautical market.


Key figures (2014)
  • Sales of USD 2 billion
  • 20% operational margin  
  • 4 600 employees
  • 29 production and R&D sites
  • Number 2 worldwide in materials for the aircraft industry (out of 3 major players)
  • Number 2 worldwide in industrial materials (out of 6 major players)
  • Number 1 worldwide in mineral separation processes (niche market)


A collaborative approach with customers

Cytec entities adopt a common approach to development and marketing in their growth platforms. Each works closely with customers to develop specific technologies for demanding applications, and continues this collaboration throughout the qualification process. Cytec's commercial and technical organizations are integrated into the operations of its major customers, enabling these to benefit from Cytec's applications and processes expertise. 

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Aerospace: a new key market for Solvay

Acquiring Cytec will give Solvay privileged access and strong credibility with major aerospace clients. Cytec sells to all the big commercial aviation names, including Boeing and Airbus. It also has a strong presence in the production of various military aircraft and helicopters. Cytec generates half of its turnover in Aerospace and 2/3rd of its sales in composite materials.

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Cytec's Aerospace Materials division delivers advanced composite materials and adhesives engineered for high demanding environments like wide temperature variations and materials expansion/contraction from pressure changes. With a 50 year technological legacy, Aerospace Materials offers solutions to the needs of aircraft manufacturers, especially for primary and secondary structures, cabins, engines, engine casings and space applications. Its product portfolio includes pre-impregnated fabrics (‘prepegs’) and resin infusion systems, adhesives and coatings, carbon fiber, auxiliary materials and composite tooling. It also provides consumables for the vacuum manufacturing of prepregs and resin infusion parts. 

This range of high added value products and solutions aims primarily at lightening aircraft structures, therefore reducing airlines' fuel consumption and CO2emissions.

After integrating Cytec, Solvay will realize around 1/4 of its turnaround in the Automotive and Aerospace segment. This will be the Group's leading business sector within its new boundaries, with significant growth potential.

Strong synergies between Cytec and Solvay

The Cytec acquisition marks a decisive step-change in the transformation of Solvay's activities portfolio, presenting the Group with a unique opportunity to expand its offering of high added value solutions and materials for the aerospace and automotive industries, and to strengthen its formulations business with a new mining industry-dedicated activity. 
The Cytec acquisition marks a decisive step-change in the transformation of Solvay's activities portfolio, presenting the Group with a unique opportunity to expand its offering of high added value solutions and materials for the aerospace and automotive industries, and to strengthen its formulations business with a new mining industry-dedicated activity. 

The combining of technologies, know-how and talents brings benefits to both companies, creating numerous expansion opportunities. Solvay will be able to build on Cytec's strong presence with the big names in aeronautics, while Cytec will gain from Solvay's solid relationships with leading automotive manufacturers and suppliers.
With strong internal innovation capacity, Cytec is well positioned in high-growth and long-term markets, while its technologies and geographic presence ideally complement those of Solvay. 

The acquisition will boost the Group's profile towards greater growth (entry into the aerospace market), greater resilience and better profitability of its activities portfolio.

Significant value creation potential through enhanced positioning :

- Solvay becomes the world number 2 in composite materials for aerospace

- Solvay accelerates the growth of its Advanced Materials platform with a major input in composite materials 

- Solvay strengthens its Advanced Formulations division with the world's leading specialty mining chemicals provider

- Solvay improves its earnings growth dynamics

- Synergies estimated at over €100 million per year pre-tax

- Acquisition accretive to adjusted EPS from year two onwards

The Cytec acquisition perfectly matches Solvay's strategic vision of developing a chemistry model that meets the major challenges of society, and creates long term value by offering customers ever more innovative and environmentally friendly products and solutions.

DISCLAIMER
This document does not constitute an offer to sell, or a solicitation of offers to purchase or subscribe for, securities in the United States or any other jurisdiction. The securities referred to herein have not been and will not be, registered under the Securities Act of 1933, as amended, and may not be offered, exercised or sold in the United States or to U.S. persons absent registration or an applicable exemption from registration requirements. There is no intention to register any portion of the offering in the United States or to conduct a public offering of securities in the United States. The issue, exercise or sale of securities in the offering are subject to specific legal or regulatory restrictions in certain jurisdictions. The Company assumes no responsibility in the event there is a violation by any person of such restrictions. The information contained herein shall not constitute or form part of an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the securities referred to herein, in any jurisdiction in which such offer, solicitation or sale would be unlawful. The Company has not authorized any offer to the public of securities in any Member State of the European Economic Area. With respect to each Member State of the European Economic Area and which has implemented the Prospectus Directive (each, a “Relevant Member State”), no action has been undertaken or will be undertaken to make an offer to the public of securities requiring publication of a prospectus in any Relevant Member State. As a result, the securities may only be offered in Relevant Member States (a) to any legal entity which is a qualified investor as defined in Article 2(1)(e) of the Prospectus Directive; or (b) in any other circumstances which do not require the publication by the Company of a prospectus pursuant to Article 3 of the Prospectus Directive. For the purposes of this paragraph, the expression an “offer of securities to the public” means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to exercise, purchase or subscribe the securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU. This communication is directed only at (i) persons who are outside the United Kingdom or (ii) in the United Kingdom, persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”), or who are high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2) of the Order (all such persons together being referred to as “relevant persons”). Any investment or investment activity to which this communication relates will only be available to and will only be engaged in with, relevant persons. Any person who is not a relevant person must not act or rely on this document or any of its contents.