Creating a global leader uniquely positioned in metalworking and primary metals platforms with deep expertise across attractive customer segments.

Quaker Chemical Corporation (NYSE: KWR) and Houghton International Inc., companies with a combined 250-year history as providers of process fluids, chemical specialties, and technical expertise to the global primary metals and metalworking industries, today announced that they have executed a definitive agreement to combine the companies. Both Quaker Chemical and Houghton International are headquartered in the Philadelphia area.

“The proposed combination of Quaker Chemical and Houghton International represents the next phase of our evolution, and stays true to the vision of growing in our core specialties,” said Michael F. Barry, Chairman and Chief Executive Officer of Quaker Chemical. “Joining forces with Houghton International combines two highly complementary businesses, each having a long history of building tremendous expertise, technology and customer-centric cultures dedicated to delivering long-term sustainable value to customers, share-holders and associates. The new company will capitalise on best practices and expertise from both businesses.”

Sanjay Hinduja, Chairman of Houghton International, which is owned by the Hinduja Group through its Gulf Oil business, said, “We are pleased to enter this agreement to unite these two distinguished and global companies. Together we will strengthen our capabilities and business models to better serve the global market and all our stakeholders.”

Under the terms of the agreement, Houghton International share-holders will receive USD 172.5 million of cash and 24.5 per cent ownership of the combined company, representing approximately 4.3 million shares of newly issued Quaker Chemical stock. In addition, Quaker Chemical will assume Houghton International’s debt and cash, with net debt of approximately USD 690 million at year-end 2016. The agreement has been approved by both Quaker Chemical’s board of directors and Houghton International’s board of directors with full support of the Hinduja Group, which will become Quaker Chemical’s largest shareholder.

Houghton International and Quaker Chemical are both known for a commitment to innovation in a highly specialised and technologically demanding industry. “In addition to our complementary businesses,” said Mike Shannon, Chief Executive Officer of Houghton International, “we are each committed to creating solutions for our customers through innovation, strong technical expertise and global reach with localised applications expertise.”

Combining Quaker Chemical’s and Houghton International’s product solutions and service offerings will allow the new company to better serve customers in the automotive, aerospace, heavy equipment, metals, mining, machinery, marine, offshore, and container industries. The business will have one of the world’s most expansive metalworking platforms comprised of speciality products that include removal fluids, forming fluids, protecting fluids, heat treating fluids, industrial lubricants and greases. The expanded portfolio is expected to generate significant cross-selling opportunities and allow further expansion into growth markets that include India, Korea, Japan, and Mexico. By combining resources, the new company will increase the breadth of its innovative technology, accelerate its product development initiatives and time to market, and diversify its long-term R&D pipeline. The company’s customer-intimate business model will be further strengthened with an expanded chemical management offering.

For 2016, Quaker Chemical had revenue of USD 747 million, USD 107 million of adjusted EBITDA, and USD 22 million of net cash. During the same period, Houghton International had revenue of USD 767 million, USD 120 million of adjusted EBITDA, and USD 690 million of net debt. After the close of the transaction, shares of the combined company will continue to be listed on the New York Stock Exchange. The company anticipates achieving cost synergies of approximately USD 45 million, the majority of which will be realised within two years of closing. These synergies are expected to be driven primarily by supply efficiencies and cost reductions. Additional value creation is expected through cross-selling opportunities and the ability to provide an expanded array of products and solutions for customers. Quaker Chemical has secured USD 1.15 billion in committed financing from Bank of America Merrill Lynch and Deutsche Bank Securities Inc. to support the transaction, which includes USD 200 million of additional liquidity for future needs. The completion of the transaction, which is expected by the end of 2017 or early 2018.

Following closing of the transaction, Michael F. Barry will continue as Chairman and Chief Executive Officer of the new business, and the structure of the company will be determined in the period between signing and closing. Deutsche Bank Securities Inc. is serving as Quaker Chemical’s lead financial advisor. Drinker Biddle & Reath LLP are acting as its legal advisors. The Valence Group provided a fairness opinion to the Board of Directors. RBC Capital Markets, LLC is serving as exclusive financial advisor to Houghton International. Mayer Brown LLP are acting as its legal advisors.