AMCOL International Corporation Market Cap (as of 14/03/2014): $1.49bn
Minerals Technologies Inc. Market Cap (as of 14/03/2014): $1.98bn
Imerys S.A. Market Cap (as of 14/03/2014): €4.76bn

On March 10th, 2014 Minerals Technologies Inc., a global developer and maker of mineral-based products, announced it has signed a definitive merger agreement with the Illinois-based clay-products maker AMCOL International Corporation after a harsh sequence of bids and counter-bids that began on February 12th with the French peer Imerys SA.

Indeed, the last offer of Imerys at $42.75 per share dated February 26th was further increased to $45.25 per share on March 4th in order to top Minerals Technologies’ competing offer at $45.00 per share of the previous day. Nevertheless, the latter amended its offer to $45.75 per share in cash on March 6th thus compelling the French company to withdraw its offer for the acquisition of AMCOL as “a higher price” would have not met “our internal value creation objectives over time” said Imerys’ CEO, Gilles Michel.

Since AMCOL is under the business law of Delaware, the board is typically required to take the highest offer. As a consequence, following Imerys’ decision not to increase its offer price, AMCOL terminated the understanding with Imerys in order to enter into a definitive agreement with Minerals Technologies, thus paying the French company a $39mm termination fee.

The month-long battle for AMCOL is mainly due its large reserves of bentonite, a key mineral used inthe construction and energy industries, and to its significant exposure towards the recovering US market. Indeed, Imerys’ offer aimed primarily at strengthening its position in North America in order to offset the sluggish performance in Europe as already mentioned in our previous article.

Since Imerys’ first offer at $41.00 per share, bidding has escalated by $4.75 to $45.75 per share resulting in a price tag of $1.49bn from the original $1.33bn and increasing the implied enterprise value of AMCOL from $1.55bn to $1.71bn. As a consequence, EV/EBITDA multiple rises to 11.95x from 10.84x.

The main weakness of Minerals Technologies’ offer, namely the lack of secured financing sources, was solved through J.P. Morgan’s commitment to provide the necessary funds on March 4th.Incidentally, it’s worth to note the double role played by the New York-based bank which acts as both lender and advisor. In such a way J.P. Morgan is able to improve its position in the league table as investment bank leveraging on the corporate banking business, that is, on its very nature of universal bank. As this way of doing business is becoming more and more widespread among universal banks in order to provide clients with a “one stop shop” banking service, it also raises some concerns regarding the management of risk and, consequently, of capital which can be faced moving off-balance sheet the exposures.

According to Minerals Technologies CEO Joseph C. Muscari, the merger with AMCOL will create “$50mm of specific and readily available synergies and [..] substantial growth opportunities”. In fact, beyond the $50mm cost savings, the company expects further synergies to be achieved thanks to its strong operating-management system which will significantly accelerate AMCOL integration, the combination of technology platforms and a faster geographic expansion. Finally, Minerals Technologies expects the transaction to be accretive to earnings upon closing, excluding acquisition-related costs and charges, even before taking into account synergies.

AMCOL share price has risen more than 24% since the start of the dispute on February 12th whereas it decreased by 2% to $45.71 converging to the last bid price on March 10th following Imerys’ decision to withdraw its offer. Imerys share price decreased to €64.87 after having peaked at €67.40 on March 6th, while Minerals Technologies share price surged by 6.43% to $57.91 on March 10th upon Imerys’ announcement, reflecting an implicit approval of the transaction from market participants.

Goldman, Sachs &Co. and Kirkland & Ellis LLP are serving as exclusive financial advisor and as counsel respectively to AMCOL International Corporation while Lazard is acting as Minerals Technologies’ lead financial advisor with J.P. Morgan as financial advisor.The transactions is expected to close in the first half of 2014, subject to customary closing conditions.

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