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Filed pursuant to Rule 424(b)(2) with respect to
Registration Statement No.333-88587
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PROSPECTUS
OCTOBER 20, 1999
OMNOVA Solutions Inc.
1,100,000 SHARES OF COMMON STOCK
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OMNOVA THE OFFERING
- - Our performance chemicals segment - OMNOVA is offering 1,100,000 shares of common stock
manufactures high emulsion polymers and covered by options granted to active and former employees
specialty chemicals used as coatings, of GenCorp Inc. and its subsidiaries that may be
binders, adhesives and additives. exercised from time to time.
- - Our decorative & building products - These options were granted as part of the equitable
segment designs and manufactures a adjustment to GenCorp options related to GenCorp's spin
comprehensive line of decorative and off of OMNOVA to GenCorp shareholders.
performance-enhancing surfacing - The exercise price of each option will depend on the
products. ratio of the exercise price to market price of the
- - OMNOVA Solutions Inc. existing GenCorp option to which the OMNOVA option
175 Ghent Road relates. Exercise prices range between $5.0764 per share
Fairlawn, Ohio 44333 and $14.3733 per share.
(330) 869-4200 - If the options are exercised in full, OMNOVA expects to
NYSE SYMBOL: OMN receive approximately $8,400,000.
- There is an existing trading market for these shares. The
reported last sales price on October 19, 1999 was
$7 13/16 per share.
- OMNOVA plans to use the proceeds from the offering for
working capital and other general corporate purposes.
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THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 3.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information and the financial statements and related notes that are included
elsewhere in this prospectus and in the documents that we incorporate by
reference into this prospectus. You may obtain the information incorporated by
reference into this prospectus without charge by following the instructions in
the "Where You Can Find More Information" section of this prospectus.
OMNOVA SOLUTIONS INC.
Until October 1, 1999, OMNOVA was a wholly owned subsidiary of GenCorp. On
October 1, 1999, GenCorp made a special dividend to its shareholders, on a share
for share basis, of all outstanding shares of OMNOVA stock. Prior to the special
dividend, GenCorp transferred to OMNOVA GenCorp's performance chemicals and
decorative & building products businesses and some corporate assets. In exchange
for those assets, OMNOVA issued to GenCorp additional shares of OMNOVA common
stock and assumed some liabilities of GenCorp related to the assets and
businesses transferred.
OMNOVA develops, manufactures and markets emulsion polymers, specialty
chemicals and decorative & building products for a variety of industrial,
commercial and consumer markets. The performance chemicals segment's broad range
of emulsion polymers and specialty chemicals are used as coatings, binders,
adhesives, and additives for paper, carpet, textile and various other
industries. The decorative & building products segment designs, manufactures and
markets a comprehensive line of polyvinyl chloride and paper-based decorative
and performance-enhancing surface products including wallcovering, coated
fabrics, vinyl woodgrain and paper laminates and graphic arts and industrial
films, as well as membrane systems for roofing. Markets served include
furniture, transportation, construction, remodeling, interior decorating and
graphic arts.
THE OPTIONS
In connection with the spin off of OMNOVA by GenCorp, each exercisable
option for GenCorp common stock granted under GenCorp's 1993 and 1997 stock
option plans was split into options to acquire GenCorp common stock and OMNOVA
common stock. The number of options in each company is equal to the number of
exercisable options under the GenCorp stock option plans. The exercise price of
each resulting option bears the same ratio to the market price, immediately
after the spin off, of the respective company's stock, as the exercise price of
the original GenCorp option bore to the market price of GenCorp shares
immediately before the spin off. The vesting provisions and option periods of
the OMNOVA adjustment options are the same as for the original GenCorp options.
This prospectus relates to shares of OMNOVA common stock issuable under OMNOVA
adjustment options granted to active and former employees of GenCorp and its
subsidiaries.
THE OFFERING
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Securities offered................... Up to 1,100,000 shares of OMNOVA common stock
issuable upon the exercise from time to time of
adjustment options granted to active and former
employees of GenCorp and its subsidiaries.
OMNOVA Common Stock Outstanding...... Immediately after the spin off, there were
41,797,551 shares of OMNOVA common stock issued and
outstanding.
Use of proceeds by OMNOVA............ For working capital and other general corporate
purposes.
NYSE Symbol.......................... OMN
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RISK FACTORS
An investment in OMNOVA common stock involves risk. In addition to the
other information contained or incorporated by reference in this prospectus, you
should carefully consider the following risk factors in deciding whether to
invest in OMNOVA common stock.
OMNOVA'S ABSENCE OF HISTORY AS AN INDEPENDENT COMPANY MAKES IT DIFFICULT TO
PREDICT FUTURE PERFORMANCE.
OMNOVA's business has historically been conducted by GenCorp as part of its
overall operations. Therefore, OMNOVA does not have an operating history as an
independent company. OMNOVA was formed in June 1999 solely for the purpose of
effecting the spin off. Therefore, the financial information incorporated by
reference in this prospectus does not necessarily reflect the financial
position, results of operations and cash flows of OMNOVA had OMNOVA been
operated independently during the periods presented. As a stand-alone company,
OMNOVA's results of operations may or may not continue at a level similar to its
results of operations while a part of GenCorp. OMNOVA also believes that its
general and administrative expenses will be higher than the expenses reflected
in the historical financial statements of its business.
OMNOVA MAY NOT BE ABLE TO CONSUMMATE OR INTEGRATE EFFECTIVELY ACQUISITIONS AND
ITS RESULTS MAY BE ADVERSELY AFFECTED.
OMNOVA's performance chemicals and decorative & building products
businesses have completed five acquisitions since the beginning of fiscal 1997.
In addition, OMNOVA's business strategy contemplates continued expansion,
including growth through future acquisitions. However, OMNOVA's ability to
consummate and integrate effectively any future acquisitions on terms that are
favorable to OMNOVA may be limited. OMNOVA may not have adequate financial
resources to consummate any acquisitions. In addition, OMNOVA's ability to issue
additional equity securities to raise capital or consummate acquisitions may be
impaired, for a period of time after the spin off, as a result of the tax
indemnity given by OMNOVA with respect to the tax-free nature of the spin off.
INCREASING COSTS FOR RAW MATERIALS MAY ADVERSELY AFFECT OMNOVA'S PROFITABILITY.
OMNOVA's performance chemicals segment uses monomers extensively in its
products. In addition, OMNOVA's decorative & building products segment uses
polyvinyl chloride resins extensively in its products. The cost of these raw
materials has a significant impact on OMNOVA's profitability. A significant
increase in the price of either or both of these raw materials could materially
increase OMNOVA's operating costs and materially adversely affect its profit
margins. Raw materials prices for decorative & building products have recently
shown signs of an upward trend. While OMNOVA generally attempts to pass
increased raw materials prices onto its customers in the form of price
increases, there has historically been a time delay between increased raw
materials prices and the ability to increase product prices. In addition, OMNOVA
may not be able to increase its prices sufficiently to cover any significant raw
materials cost increases.
ENVIRONMENTAL LAWS, REGULATIONS AND LIABILITIES COULD ADVERSELY AFFECT OMNOVA'S
RESULTS OF OPERATIONS.
The business operations of OMNOVA, like those of other companies in the
industries in which OMNOVA operates, are subject to numerous foreign, federal,
state and local environmental laws and regulations. These laws and regulations
not only affect OMNOVA's current operations, but also could impose liability on
OMNOVA for past operations that were conducted in compliance with then
applicable laws and regulations. OMNOVA anticipates that these laws and
regulations will become increasingly stringent.
PROTRACTED WORK STOPPAGES COULD ADVERSELY AFFECT OMNOVA'S RESULTS OF OPERATIONS.
Approximately 28% of OMNOVA's employees are covered by collective
bargaining agreements. Any protracted work stoppages in one or more facilities
could materially adversely affect OMNOVA's results of operations.
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INTENSE COMPETITION COULD ADVERSELY AFFECT OMNOVA'S COMPETITIVE POSITION OR
RESULTS OF OPERATIONS.
The markets for OMNOVA's businesses are highly competitive and actions by
its competitors could adversely affect its competitive position. In particular,
the performance chemicals segment competes against a few large competitors that
have financial, personnel, marketing and other resources that are greater than
OMNOVA's resources.
RISKS ASSOCIATED WITH FOREIGN OPERATIONS COULD ADVERSELY AFFECT OMNOVA'S RESULTS
OF OPERATIONS.
OMNOVA has foreign operations. Foreign operations subject OMNOVA to the
risks of doing business abroad, including:
- currency fluctuations;
- difficulties in staffing and managing foreign operations; and
- adverse tax consequence from operating in multiple jurisdictions.
Any of these factors could have a material adverse effect on OMNOVA's
financial position and results of operations.
OMNOVA MAY BE LIABLE FOR GENCORP'S TAX LIABILITY RELATED TO THE SPIN OFF OF
OMNOVA COMMON STOCK BY GENCORP.
In connection with the tax-free spin off of OMNOVA common stock by GenCorp
to its shareholders in October 1999, OMNOVA agreed not to take any action that
would cause the spin off to be taxable to GenCorp under section 355 of the
Internal Revenue Code. OMNOVA also agreed to indemnify GenCorp for any liability
suffered by it if OMNOVA were to take any action, or others were to take actions
related to OMNOVA common stock, that would cause the spin off to be taxable to
GenCorp. The spin off would become taxable to GenCorp on a presumptive basis, if
50.0% or more of OMNOVA's common stock is acquired during a period of time after
the spin off. Accordingly, OMNOVA's ability to raise capital or consummate
acquisitions through additional issuances of equity securities may be impaired
during this period. If the Internal Revenue Service were to assert that any
future transactions involving OMNOVA common stock resulted in the spin off being
taxable to GenCorp on a presumptive basis, we cannot assure you, in light of the
lack of specific guidance in this area of the tax law, that OMNOVA could
successfully rebut the presumption. In addition, OMNOVA is liable as a member of
GenCorp's consolidated group, for any tax imposed on GenCorp. GenCorp has
indemnified OMNOVA for all spin off related taxes other than as described above.
If any tax liability related to the spin off became due and payable by OMNOVA,
the payment of such liability would have a material adverse effect on OMNOVA's
financial condition.
AN ACTIVE TRADING MARKET MIGHT NOT DEVELOP FOR OMNOVA COMMON STOCK AND TRADING
PRICES ARE UNCERTAIN.
OMNOVA common stock is listed on the NYSE. However, "regular way" trading
only started on October 4, 1999 and an active market may not develop. There can
be no assurance regarding the prices at which the OMNOVA common stock will
trade. Until the OMNOVA common stock is fully distributed and an orderly market
develops, the prices at which the stock trades may fluctuate significantly.
Prices for the OMNOVA common stock will be determined in the marketplace and may
be influenced by many factors, including, without limitation, (1) the depth and
liquidity of the market for the OMNOVA common stock; (2) investors' perceptions
of OMNOVA and the industries in which it participates; (3) OMNOVA's dividend
policy; and (4) changes in government regulation and general economic and market
conditions.
Virtually all of the shares of outstanding OMNOVA common stock are eligible
for immediate resale in the public market. Any sales of substantial amounts of
OMNOVA common stock in the public market, or the perception that sales of
substantial amounts might occur, whether as a result of the spin off or
otherwise, could materially adversely affect the market price of OMNOVA common
stock.
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OMNOVA MAY NOT PAY DIVIDENDS.
The dividend policy of OMNOVA will be determined by its Board of Directors.
The future payment of any dividends by OMNOVA will be based on the results of
operations and financial condition of OMNOVA and other business considerations
that its Board of Directors considers relevant. Although OMNOVA currently
intends to pay dividends in the future, we cannot assure you that OMNOVA will
pay any dividends.
EMPLOYEES OF GENCORP MAY HAVE THE POWER TO INFLUENCE MATTERS BROUGHT BEFORE THE
SHAREHOLDERS OF OMNOVA FOR APPROVAL AND SUBSTANTIAL SALES BY THOSE EMPLOYEES MAY
ADVERSELY AFFECT THE MARKET PRICE OF THE OMNOVA COMMON STOCK.
Immediately after the spin off, GenCorp employees participating in the
GenCorp/OMNOVA retirement savings plans beneficially owned approximately 11% of
the outstanding shares of OMNOVA common stock, based on the share ownership of
GenCorp common stock on September 27, 1999. Voting of shares by participants in
the plans or by the plans' Benefit Management Committee could significantly
influence the outcome of matters submitted to the shareholders of OMNOVA for
approval. The Benefits Management Committee is comprised of officers of GenCorp
and OMNOVA. Sales of any significant amount of OMNOVA common stock by the
trustee in response to withdrawals or fund transfers by GenCorp employees could
adversely affect the market price of the OMNOVA common stock.
ANTI-TAKEOVER PROVISIONS MAY AFFECT THE MARKETABILITY AND MARKET PRICE OF
OMNOVA'S COMMON STOCK.
The articles of incorporation and code of regulations of OMNOVA, as well as
Ohio statutory law, contain provisions that may have the effect of discouraging
an acquisition of control of OMNOVA not approved by its Board. These provisions
may also have the effect of discouraging third parties from making proposals
involving an acquisition or change of control of OMNOVA, although any proposals,
if made, might be considered desirable by a majority of OMNOVA's shareholders.
These provisions could also have the effect of making it more difficult for
third parties to replace current management of OMNOVA without the concurrence of
its Board. The existence of these provisions may adversely affect the
marketability and market price of OMNOVA common stock.
THE YEAR 2000 PROBLEM MAY DISRUPT OMNOVA'S OPERATIONS.
OMNOVA is currently engaged in a comprehensive project to upgrade its
information, technology, manufacturing and facilities computer hardware and
software programs to address the Year 2000 issue at its domestic and
international businesses. OMNOVA believes that approximately 90% of its systems
are Year 2000 ready as of August 31, 1999, and the remainder will be Year 2000
ready by October 31, 1999.
Based upon currently available information and considering OMNOVA's
decentralized systems and Year 2000 efforts, management believes that the most
reasonably likely worst case scenario could result in minor short-term business
interruptions. OMNOVA is preparing contingency plans which include alternative
sourcing to minimize any disruptions to its businesses resulting from a vendor
or supplier not being Year 2000 ready. However, failure by OMNOVA and/or its
vendors and customers to complete Year 2000 readiness work in a timely manner
could have a material adverse effect on some of OMNOVA's operations. OMNOVA's
exposure could increase or its timetable for Year 2000 readiness could be
delayed as a result of any new acquisitions.
WE HAVE MADE STATEMENTS CONCERNING FUTURE FINANCIAL RESULTS WHICH ARE SUBJECT TO
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE EXPRESSED IN THESE STATEMENTS.
This prospectus contains and incorporates by reference statements that are
forward-looking in nature. These statements include comments regarding the
intent, belief or current expectations of OMNOVA, its directors or officers. All
statements other than statements of historical facts are forward-looking
statements. Forward-looking statements are typically identified by the words
"believe," "expect," "anticipate," "intend," "estimate" and similar expressions.
Although these forward-looking statements, and the assumptions upon which they
are based, reflect current reasonable judgments regarding the direction of the
businesses of OMNOVA, actual results will almost always vary, sometimes
materially. OMNOVA makes no commitment to revise or update any
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forward-looking statements in order to reflect events or circumstances after the
date the statement is made. In addition to the information contained or
incorporated in this prospectus, including, without limitation, the information
under "Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in OMNOVA's Form 10, which identifies
important factors that could affect actual results, other factors could affect
actual results, including, without limitation:
- General economic trends affecting OMNOVA's markets.
- Governmental and regulatory policies including environmental regulations.
- OMNOVA's acquisition activities.
- Raw material prices for chemical feed stocks including polyvinyl
chloride, styrene and butadiene.
- The ability of OMNOVA and its customers and vendors to successfully
modify and convert their systems to be Year 2000 ready.
- Fluctuations in exchange rates of foreign currencies and other risks
associated with foreign operations.
Additional risk factors may be described from time to time in OMNOVA's
filings with the Securities and Exchange Commission. All of these risk factors
are difficult to predict, contain material uncertainties that may affect actual
results and may be beyond OMNOVA's control. Any forward-looking statements are
expressly qualified in their entirety by these factors.
USE OF PROCEEDS
OMNOVA estimates the net proceeds from the sale of the 1,100,000 shares of
common stock issuable upon exercise of the adjustment options granted to active
and former employees of GenCorp and its subsidiaries will be about $8.4 million
if all options are exercised in full. OMNOVA will use any proceeds from the
exercise of options for working capital and other general corporate purposes.
PLAN OF DISTRIBUTION
Immediately prior to the spin off, approximately 231 active and former
employees of GenCorp and its subsidiaries (other than OMNOVA) held exercisable
options to purchase up to 1,100,000 shares of GenCorp common stock issued under
GenCorp's 1993 and 1997 stock option plans. Under the GenCorp option plans and
the terms of agreements related to the spin off, exercisable GenCorp options
were split into options to acquire GenCorp common stock and OMNOVA common stock
in order to preserve the financial value of the exercisable GenCorp options.
Therefore, OMNOVA issued options to purchase up to 1,100,000 shares of OMNOVA
common stock to active and former employees of GenCorp and its subsidiaries. Any
shares acquired on exercise of the options will be issued pursuant to the
registration statement of which this prospectus is a part.
The options were issued pursuant to OMNOVA's Option Adjustment Plan, which
was created for the purpose of issuing adjustment and replacement options with
respect to GenCorp options outstanding at the time of the spin off. The plan
provides for the issuance of up to 4 million shares of OMNOVA common stock upon
the exercise of adjustment and replacement options. The number of shares may be
adjusted to reflect reorganizations, changes in OMNOVA's capital structure and
similar transactions or events. This prospectus relates only to shares of OMNOVA
common stock issuable upon the exercise of adjustment options granted to active
and former employees of GenCorp and its subsidiaries.
In connection with the spin off and pursuant to the plan, persons who held
exercisable GenCorp options generally received an additional OMNOVA option for
the same number of shares of OMNOVA common stock. The exercise price of the
OMNOVA option bears the same ratio to OMNOVA's market price immediately after
the spin off as the original related GenCorp options exercise price bore to
GenCorp's market price immediately before the spin off. The other terms of each
OMNOVA option are the same as the terms of the original GenCorp option to which
it relates.
The plan has been filed as an exhibit to the registration statement of
which this prospectus is a part.
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LEGAL MATTERS
Legal matters in connection with the offering described in this prospectus
will be passed upon for OMNOVA by James C. LeMay, OMNOVA's Senior Vice
President, Law and General Counsel. As of October 19, 1999, Mr. LeMay
beneficially owned approximately 12,323 shares of OMNOVA common stock.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our combined
financial statements included in our Form 10/A (Amendment No. 3) as of November
30, 1998 and 1997 and for each of the three years in the period ended November
30, 1998, as set forth in their report, which is incorporated by reference in
this prospectus and elsewhere in the registration statement. Our financial
statements are incorporated by reference in reliance on Ernst & Young LLP's
report, given on their authority as experts in accounting and auditing.
The financial statements of Sequa Chemicals Corporation as of October 28,
1998 and for the period from January 1, 1998 to October 28, 1998, included in
OMNOVA's Form 10 have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto and are
incorporated in this prospectus in reliance upon the authority of said firm as
experts in accounting and reporting in giving said report.
The financial statements of the European Commercial Wallcoverings Business
as of January 31, 1997 and 1998 and for the years then ended, included in
OMNOVA's Form 10, have been audited by PricewaterhouseCoopers, independent
accountants, as stated in their report appearing in the Form 10, which is
incorporated in this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
AVAILABLE INFORMATION
We file reports, proxy statements, and other information with the
Securities and Exchange Commission. These reports, proxy statements, and other
information can be read and copied at the Commission's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. Please call the Commission at
1-800-SEC-0330 for further information on the Public Reference Room. The
Commission maintains an internet site at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the Commission, including our company. In
addition, our common stock is listed on the NYSE and our reports and other
information can be inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005.
We have filed a registration statement on Form S-3 with the Commission with
respect to the securities offered hereby. As permitted by the rules and
regulations of the Commission, this prospectus omits certain information,
exhibits and undertakings contained in the Form S-3. You can obtain the
additional information from the Commission as described above.
INCORPORATION BY REFERENCE
The Commission allows us to "incorporate by reference" the documents that
we file with the Commission. This means that we can disclose information to you
by referring you to those documents. Any information we incorporate in this
manner is considered part of this prospectus. Any information we file with the
Commission after the date of this prospectus and until this offering is
completed will automatically update and supersede the information contained in
this prospectus.
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We incorporate by reference the following documents that we have filed with
the Commission and any filings that we will make with the Commission in the
future under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934 until this offering is completed:
- Registration Statement on Form 10, as amended;
- Quarterly Report on Form 10-Q for the quarter ended August 30, 1999;
- Current Report on Form 8-K dated September 17, 1999 and filed on
September 24, 1999; and
- A description of our common stock contained under the heading "Item 11.
Description of Registrant's Securities to be Registered" in the Form 10,
as amended.
We will provide without charge, upon written or oral request, a copy of any
or all of the documents which are incorporated by reference into this
prospectus. Requests should be directed to: OMNOVA Solutions Inc., Attention:
Secretary, 175 Ghent Road, Fairlawn, Ohio 44333; telephone number: 330-869-4200.
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October 20, 1999
OMNOVA SOLUTIONS INC.
1,100,000 Shares of Common Stock
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PROSPECTUS
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We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell those securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus or any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of the company
have not changed since the date hereof.
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