The purchase price for Vitro's equity is $80 million in cash. Crisa's 2005 sales were approximately $192 million. Bear, Stearns & Co. Inc. has served as Libbey's exclusive financial advisor on this transaction.
Crisa, the largest glass tableware manufacturer in Mexico and Latin America, manufactures and markets a wide variety of glass tableware. In addition, Crisa is a leading supplier of glass coffee pots and blender jars. The acquisition is consistent with Libbey's growth strategy to be a supplier of high-quality, machine-made glass tableware products to key markets worldwide while continuing to optimize its cost structure. It will further allow Libbey to use its proprietary technology and processes to enhance Crisa's capabilities enabling the closer integration of the two companies.
In conjunction with the acquisition of Crisa, Libbey will refinance Crisa's debt of approximately $65 million as well as its own existing debt. The refinancing plan is expected to include an asset-based revolver and senior unsecured notes. This structure is expected to provide the flexibility needed for Libbey to execute the integration of Crisa, including related capital expenditures, and pursue its other strategic initiatives.
Commenting on the acquisition, John Meier, chairman and chief executive officer, said, "We believe that moving beyond the existing joint venture structure will facilitate progress on many fronts. Opportunities for an improved cost structure, expanded product offering and faster sales growth by leveraging the capabilities of both companies are available. We very much look forward to working more closely with Crisa and its associates in improving our profitability and growth opportunities."
Libbey also announced that it expects to benefit from a number of synergies and cost savings associated with owning 100 percent of Crisa. These savings are estimated to result in substantial increases in Libbey's earnings before interest and taxes (EBIT) on an annual basis and include, but are not limited to:
-The elimination of profit sharing payments under an existing distribution agreement with Vitro that historically ranged from $4 to $5 million annually.
-The reduction of pension expense and cash payments related to the elimination of the retiree portion of the existing Crisa pensionobligation, which will be transferred to Vitro.
-Reduction of ongoing lease costs related to assets previously leased by Crisa and owned by Vitro, which will be transferred to Crisa as part of the transaction.
-Reduced costs for administrative services previously provided by Vitro.
-Rationalization of Crisa manufacturing processes. In connection with its rationalization plan, Libbey will incur certain one-time charges, which will be predominately non-cash.
The resulting projections for the Libbey and Crisa combined businesses in 2007 include sales in excess of $800 million and EBIT of $55 to $65 million. Depreciation and amortization are expected to be approximately $40 million, resulting in estimated earnings before interest, taxes, depreciation and amortization (EBITDA) of $95 to $105 million in 2007.
The closing of the acquisition is subject to customary conditions, including successful completion of the financing, receipt by Vitro of the approval of its stockholders and regulatory approval by the Mexican Competition and Foreign Investment commissions. Closing is expected to occur in the second quarter of 2006.