SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 30, 1998
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BETZDEARBORN INC.
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(Exact Name of Registrant as Specified in Charter)
Pennsylvania 1-11558 23-1503731
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(State Or Other (Commission (IRS Employer
Jurisdiction Of File Number) Identification No.)
Incorporation)
4636 Somerton Road, Trevose, Pennsylvania 19053-6783
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (215) 355-3300
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<PAGE>
ITEM 5. OTHER EVENTS.
On July 30, 1998, BetzDearborn Inc., a Pennsylvania
corporation (the "Company"), and Hercules Incorporated, a Delaware corporation
("Hercules"), held investor and analyst meetings relating to the Agreement and
Plan of Merger, dated as of July 30, 1998 (the "Merger Agreement"), by and among
the Company, Hercules and Water Acquisition Co., a Pennsylvania corporation and
wholly owned subsidiary of Hercules. A copy of the presentation materials used
and distributed at and subsequent to such meetings are filed as Exhibit 99.1
hereto.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
Exhibit 99.1 Presentation materials used at investor and analyst meetings.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
BETZDEARBORN INC.
Date: August 11, 1998 By:/s/ Linda R. Hansen
Name: Linda R. Hansen
Title: Vice President, Secretary and
General Counsel
<PAGE>
EXHIBIT INDEX
Exhibit No. Title
- ----------- -----
Exhibit 99.1 Presentation materials used at investor and analyst meetings
Exhibit 99.1
[HERCULES LOGO]
[BETZDEARBORN LOGO]
July 30, 1998
<PAGE>
[HERCULES LOGO]
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Q2 FINANCIAL PERFORMANCE
- - EPS up 6%
- - Asian crisis slows growth
- - Excellent margins: 40% gross profit;
23% operating profit
- - Chemical Specialties volume up; Food and
Functional Products revenues down
<PAGE>
[HERCULES LOGO]
- --------------------------------------------------------------------------------
Q2 FINANCIAL PERFORMANCE
(millions) 2Q Six Months
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1998 1997 1998 1997
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Sales $445 $462 $875 $913
- -----------------------------------------------------------------------------
Gross Profit $178 $180 $346 $347
Gross Margin 40% 39% 40% 38%
- -----------------------------------------------------------------------------
Operating Profit $101 $102 $195 $192
Operating Profit Margin 23% 22% 22% 21%
<PAGE>
[HERCULES LOGO]
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Q2 FINANCIAL PERFORMANCE
Chemical Specialities Segment
(millions) 2Q Six Months
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1998 1997 1998 1997
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Sales $227 $227 $441 $455
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Profit from Operations $43 $44 $81 $92
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Operating Profit Margin 19% 19% 18% 20%
<PAGE>
[HERCULES LOGO]
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Q2 FINANCIAL PERFORMANCE
Food and Functional Products Segment
(millions) 2Q Six Months
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1998 1997 1998 1997
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Sales $218 $235 $433 $458
- -----------------------------------------------------------------------------
Profit from Operations $58 $60 $113 $105
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Operating Profit Margin 27% 26% 26% 23%
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
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STRATEGIC RATIONALE FOR COMBINATION
- - Creates the world's premier paper chemical franchise
- - Adds leading water treatment franchise
- - Combines BetzDearborn's strong sales and customer
service with Hercules' low-cost manufacturing
- - Joins two technology leaders in specialty chemicals
- - Both focus on helping customers reduce operating costs
- - Establishes platform for revenue growth
- - Builds value for shareholders
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
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THE NEW HERCULES
Creates $3.5 billion specialty chemicals company with
six leading franchises
- #1 Paper Chemicals
- #1 Functional Chemicals
- #1 Process Chemicals
- #1 or #2 Water Treatment
- #1 Rosin Resins, #2 Hydrocarbon Resins
- #1 Food Gums
- #1 Water Soluble Polymers (Aqualon)
- #1 Thermal-Bond Fibers (FiberVisions)
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
- --------------------------------------------------------------------------------
THE NEW HERCULES - PRODUCT SALES MIX
[Three pie charts showing the following information:
Hercules BetzDearborn
1997 sales = $2.2 Billion* 1997 sales = $1.3 Billion
- ------------------------------- ------------------------------------
Fibers 14% Metals processing 3%
Resins 22% Hydrocarbon processing 9%
Paper 22% Paper 26%
Food and functional Water Treatment 62%
products 42%
The New Hercules
1997 sales = $3.5 Billion*
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Metals processing 1%
Hydrocarbon processing 3%
Fibers 9%
Resins 13%
Water Treatment 23%
Paper 24%
Food and functional
products 27%
*Includes 100% of FiberVisions]
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
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THE NEW HERCULES - GEOGRAPHIC SALES MIX
[Three pie charts showing the following information:
Hercules BetzDearborn
1997 sales = $2.2 Billion* 1997 sales = $1.3 Billion
- ------------------------------- ----------------------------------
Asia Pacific 10% Asia Pacific 6%
Americas** 11% Americas** 15%
Europe 35% Europe 25%
United States 44% United States 54%
The New Hercules
1997 sales = $3.5 Billion*
---------------------------------
Asia Pacific 8%
Americas** 13%
Europe 31%
United States 48%
*Includes 100% of FiberVisions
**Canada and Latin America]
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
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TRANSACTION SUMMARY
Terms: $72 per share in cash
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Synergies: A minimum of $100 million
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EBITDA Multiple: 10.6 (7.9 with synergies)
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Accretion: Year 1 on cash basis
Year 2 on EPS basis
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Conditions: BetzDearborn shareholder approval
Customary conditions
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Timing: 4Q 1998 Close
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
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CORPORATE GOVERNANCE
BOARD COMPOSITION:
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Existing 10 Hercules directors
4 BetzDearborn directors
SENIOR MANAGEMENT:
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Keith Elliott Chairman and Co-CEO
Bill Cook Vice Chairman and Co-CEO
Vince Corbo President and COO
George MacKenzie Senior VP and CFO
Dominick DiDonna Senior VP/Paper
Larry Rankin Senior VP/Water Treatment
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
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HERCULES COMMITMENT TO SHAREHOLDER VALUE
CRITERIA FOR ACQUISITIONS HPC/BTL
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Strategic linkage with core business X
IRR at least 50% premium to cost of capital X
(most likely case)
IRR at least 1 percentage point
above cost of capital X
(downside case)
Cash earnings accretive in Year 1 X
Reported earnings accretive by Year 2 X
Enhanced future growth opportunities X
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
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RECENT ACQUISITIONS
Met
Date Acquisition Criteria
- -----------------------------------------------------------------------------
July 1998 FiberVisions (49%) yes
(non-woven fibers)
April 1998 Houghton division yes
(paper chemicals
April 1998 Citrus Colloids yes
(pectin)
1997/1998 Allied Colloids no at
205p
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
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AN IDEAL COMBINATION
- - Compatible businesses
- - Increased ability to meet customer needs
- - Both companies bring strong technology focus
- - Complementary senior management teams
- - Value for shareholders
- - Benefits for customers
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
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BETZDEARBORN
Purpose
Our purpose is to help our customers be more successful
by reducing their operating costs and by achieving their
environmental objectives through our superior technology
and service
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
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BETZDEARBORN STRENGTHS
- - 2,600 front line sales force
- - Market share leadership in both process chemicals
and water treatment
- - Strong global presence
- - Broad product line capabilities
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
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BETZDEARBORN MARKETS SERVED
- - Heavy industry
- Paper
- Hydrocarbon processing
- Steel
- Power
- - Middle market
- Food and Beverage
- Pharmaceutical
- Electronics
- Automotive
- Metals Processing
- Commercial/Institutional
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
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BETZDEARBORN APPLICATION AREAS
- - Water treatment
- Influent water clarification
- Effluent water clarification
- Boiler
- Cooling
- - Process treatment
- Biological control
- Deposit control
- Retention/Drainage Aids
- Corrosion control
- Defoamers
- Finished products additives
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
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BETZDEARBORN GROWTH OPPORTUNITIES
- - Geographic expansion
- - Middle market
- - Technology development and deployment
- - Increased cost competitiveness
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
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WORLD'S PREMIER PAPER CHEMICAL BUSINESS
- - Combination of strengths
- Hercules is leader in functional chemicals
- BetzDearborn is leader in process chemicals
- - Increasing customer demand for integrated solutions
- - Broadest offering of products and services
- - Shared focus on reducing customer operating costs
Unique ability to respond to changing customer needs
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
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"RIVER TO REEL" CAPABILITIES
Water treatment chemicals BetzDearborn
Pulping process chemicals BetzDearborn
Paper making process chemicals BetzDearborn/Hercules
Paper making functional chemicals Hercules
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
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"RIVER TO REEL" CAPABILITIES
BetzDearborn Hercules
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Process Chemicals to Enhance Functional Chemicals for
Enhance Machinery Improved Paper Properties
Performance 4. Sizing
1. Biocides 5. Wet & Dry Strength
2. Deposit Control 6. Surface Sizing
3. Retention/Drainage Aids
[Diagram showing the Enhance Machinery Performance, Paper Making and Coating
Converting Processes]
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
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INTEGRATION PROCESS
Vince Corbo
Integration Leader
/
--------------------------------------------------------
/ / /
Dominck DiDonna Larry Rankin George MacKenzie
Paper Team Water Treatment Team Corporate Team
Implementation to begin immediately after closing
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
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OPPORTUNITIES
- - Cost savings
- Corporate overhead
- Manufacturing facilities
- Other facilities
- - Technology
- - R&D and new product development
- - Revenue enhancements
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
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ACCRETION ANALYSIS
CASH EARNINGS BASIS EPS BASIS
- -----------------------------------------------------------------------------
1999 Double-digit accretive Single-digit dilutive
2000 Double-digit accretive High single-digit accretive
2001 Double-digit accretive Double-digit accretive
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
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COMPARABLE TRANSACTION MULTIPLES
Transaction EBITDA
- -----------------------------------------------------------------------------
Ciba/Allied Colloids 14.2x
Betz/Dearborn 13.3x
Henkel/Loctite 12.6x
ICI/Unilever Specialty 10.6x
Hercules/BetzDearborn 10.6x
HERCULES/BETZDEARBORN 7.9X
(With $100 million of synergies)
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
- --------------------------------------------------------------------------------
FINANCING
- - Credit facility underwritten by NationsBank
- - Finance acquisition of all shares
- - Refinance existing debt of both companies
- - Expect to remain investment grade
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
- --------------------------------------------------------------------------------
BALANCE SHEET
Hercules BetzDearborn Pro Forma
(6/30/98) (6/30/98) Combined
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Debt to total capitalization 40% 60% 86%
Total debt to EBITDA 1.2x 2.6x 4.0x
EBIT to interest 17.0x 4.2x 2.4x
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
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FINANCIAL STATISTICS
($ billions) Hercules BetzDearborn Pro Forma
(12/31/97) (12/31/97) Combined
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Revenues 2.2* 1.3 3.5*
Gross Profit (%) 37.4 60.0 47.0
R&D (%) 2.8 3.0 2.9
SG&A (%) 16.3 43.1 27.7
EBIT (%) 21.7 15.9 19.3
*Includes 100% of FiberVisions
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
- --------------------------------------------------------------------------------
COMPELLING COMBINATION
- - Creates world's premier paper chemical franchise
- - Adds leading water treatment franchise
- - Establishes platform for revenue growth
- - Meets all acquisition criteria
<PAGE>
[HERCULES LOGO]
[BETZDEARBORN LOGO]
<PAGE>
[HERCULES LOGO] [BETZDEARBORN LOGO]
- --------------------------------------------------------------------------------
This news release includes forward-looking statements, as defined in the
Private Securities Litigation Reform Act of 1995, reflecting management's
current analysis and expectations, based on reasonable assumptions. Results
could differ materially depending on such factors as business climate,
economic and competitive uncertainties, higher manufacturing costs, reduced
level of customer orders, risks in developing new products and
technologies, environmental and safety regulations and clean-up costs,
foreign exchange rates, and adverse changes in economic and political
climates around the world. As appropriate, additional factors are contained
in reports filed with the Securities and Exchange Commission. This
paragraph is included to provide safe harbor for forward-looking
statements, which are not required to be publicly revised as circumstances
change.
