OM GROUP INC, 424B4, 1998-06-30

OM GROUP INC
424B4, 1998-06-30
INDUSTRIAL INORGANIC CHEMICALS

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<PAGE> 1
Filed Pursuant to Rule 424(b)(4)
Registration No. 333-53437

PROSPECTUS
JUNE 30, 1998
1,750,000 SHARES

[OM GROUP LOGO]

OM GROUP, INC.

COMMON STOCK
All of the shares of Common Stock offered hereby are being sold by OM
Group, Inc. (the "Company"). The Common Stock of the Company is traded on the
New York Stock Exchange under the symbol "OMP." On June 29, 1998, the closing
sale price of the Common Stock as reported on the New York Stock Exchange
Composite Tape was $42.0625 per share. See "Price Range of Common Stock and
Dividends."

SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share........................................ $41.25 $2.00 $39.25
Total(3)......................................... $72,187,500 $3,500,000 $68,687,500
- --------------------------------------------------------------------------------------------------
</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting expenses payable by the Company estimated at $300,000.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an aggregate of 262,500 additional shares at the Price to the Public,
less Underwriting Discounts and Commissions, solely to cover
over-allotments, if any. If the option is exercised in full, the total Price
to the Public, Underwriting Discounts and Commissions and Proceeds to the
Company, will be $83,015,625, $4,025,000 and $78,990,625, respectively. See
"Underwriting."

The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters, subject to various prior conditions, including their right to
reject any order in whole or in part. It is expected that delivery of share
certificates will be made in New York, New York, on or about July 6, 1998.

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

MERRILL LYNCH & CO.

FIRST ANALYSIS SECURITIES CORPORATION
<PAGE> 2

[OMG LOGO]

[VERTICAL INTEGRATION PROCESS CAPABILITIES CHART]

<TABLE>
<S> <C> <C>
RAW Concentrates
MATERIALS Slags
--------- Recycled Materials
Other
|
EXTRACTION Kokkola, Finland
PROCESS St. George, UT
------- |
North America
-------------
Research Triangle Park, NC
Franklin, PA
Johnstown, PA
St. George, UT
Newark, NJ
Belleville, Canada

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its regional
offices located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and 7 World Trade Center, 13th Floor, New York, New
York 10048. Copies of such materials can also be obtained from the Public
Reference Section of the Commission, Washington, D.C. 20549 at prescribed rates.
The Commission also maintains a Web site that contains reports, proxy statements
and other information filed by the Company. The Commission's Internet address is
http://www.sec.gov. The Company's Common Stock is listed on the New York Stock
Exchange ("NYSE"), and reports, proxy statements and other information
concerning the Company are available for inspection and copying at the office of
the NYSE, 20 Broad Street, New York, New York 10005.

This Prospectus constitutes a part of a Registration Statement on Form S-3
("Registration Statement") filed by the Company with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus does
not contain all of the information set forth in the Registration Statement in
accordance with the rules and regulations of the Commission. Reference is hereby
made to the Registration Statement and related exhibits for further information
regarding the Company and the securities offered hereby. Statements contained
herein concerning the provisions of any document are not necessarily complete
and, in each instance, reference is made to the copy of such document filed as
an exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference. The
Registration Statement and the exhibits thereto may be inspected and copied at
the public reference facilities of the Commission at the addresses set forth
above.

INCORPORATION BY REFERENCE

The following documents filed with the Commission in accordance with the
provisions of the Exchange Act are incorporated herein by reference:

(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, as amended by a Form 10-K/A filed with the
Commission on June 29, 1998;

(b) the description of the Company's Common Stock contained in the
Registration Statement on Form S-1 (Registration No. 33-60444) filed
with the Commission on April 1, 1993 and declared effective October
12, 1993;

(c) the Company's Current Report on Form 8-K filed with the Commission on
December 5, 1996 regarding the Company's Stockholders' Rights
Agreement;

(d) the Company's Proxy Statement filed with the Commission on March 26,
1998;

(e) the Company's Quarterly Report on Form 10-Q for the three months ended
March 31, 1998; and

(f) the Company's Current Report on Form 8-K filed with the Commission on
February 10, 1998 regarding the acquisition of Auric Corporation.

All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act, after the date of this Prospectus and prior to the
termination of the offering of the securities hereby, shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for the purposes of this Prospectus to the extent that
a statement contained herein, or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.

The Company will provide without charge to each person to whom a Prospectus
has been delivered, upon written or oral request of such person, a copy of any
or all of the documents which have been incorporated herein by reference, other
than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into such documents). Requests for such copies should
be directed to Ms. Kristine Marks, Manager of Investors Relations and Corporate
Communications, OM Group, Inc., 50 Public Square, 3800 Terminal Tower,
Cleveland, Ohio 44113-2204, telephone (216) 781-0083.
------------------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE OPEN MARKET.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
3
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus or incorporated herein.
Prospective purchasers of Common Stock should carefully read this entire
Prospectus and should consider, among other things, the matters set forth under
"Risk Factors." Unless otherwise noted, all information in this Prospectus with
respect to the Company's capital stock including share and per share amounts,
does not include Common Stock that may be issued in connection with the exercise
of the over-allotment option granted by the Company to the Underwriters.

THE COMPANY

The Company is a leading, vertically integrated producer and international
marketer of value-added, metal-based specialty chemicals and powders. The
Company applies proprietary technology to a wide variety of raw material
feedstocks to manufacture and market the following three categories of
metal-based specialty chemicals and powders--carboxylates, inorganic salts and
powders. Carboxylates, salts and powders accounted for approximately 26%, 44%
and 30% of the Company's net sales in 1997, respectively. The Company believes
it is the world's leading producer of cobalt carboxylates, cobalt and nickel
specialty inorganic salts and copper powders. The Company also believes that it
is the world's second largest producer of cobalt extra-fine powders.

The Company sells more than 400 specialty chemicals and powders for diverse
applications in more than 25 industries. The Company serves over 1,500 customers
with no single customer accounting for 10% or more of the Company's 1997 net
sales. During 1997, approximately 50% of the Company's net sales were to
customers in the Americas, 33% were to customers in Europe, and 17% were to
customers in Asia Pacific. Typically, the Company's products represent a small
portion of the customer's total cost of manufacturing or processing, but are
essential for superior product performance.

The Company believes that it has successfully grown in recent years by
accessing new product markets and leveraging core technologies and production
capabilities to satisfy current market needs. The Company had net sales of
$361.0 million, $388.0 million and $487.3 million in 1995, 1996 and 1997,
respectively, and income from operations of $44.0 million, $51.4 million and
$70.6 million in 1995, 1996 and 1997, respectively. Net income for 1995, 1996
and 1997 was $25.9 million, $30.0 million and $38.4 million, respectively.

COMPETITIVE STRENGTHS

The Company benefits from the following competitive strengths:

- - Market Leadership. As a result of its high quality products, technological
capabilities and customer service and support, the Company has achieved a
leading market position in the production of metal-based specialty chemicals
and powders. The Company serves customers on a worldwide basis in over 50
countries with an international sales force of approximately 50 persons and
110 independent agents. This sales presence, combined with the Company's
manufacturing facilities in North America, Europe and Asia Pacific, enables
the Company to respond promptly to customer needs on a worldwide basis.

- - Raw Materials Supply. Through its long-term relationships with its suppliers
and its purchasing power as the world's largest purchaser of cobalt, the
Company has been able to achieve reliability of supply for its customers. The
Company presently has contracted for the majority of its anticipated cobalt
needs through the year 2000. Additionally, the Company's ability to process a
variety of low-grade feedstocks provides enhanced supply reliability.

- - Production Capability. The Company's manufacturing plants, all of which have
received ISO 9002 certification, are capable of efficiently producing a broad
range of specialty chemicals and powders. The Company's refining capabilities
give it the flexibility to work with a variety of raw materials. The technical
capabilities of the Finnish and Utah facilities, in addition to the Company's
project to construct a smelter in the Democratic Republic of Congo, permit the
Company to transform low-grade feedstocks, such as cobalt slag, concentrates
and recycled materials, to high quality finished products. The ability to
convert and recycle these

4
<PAGE> 5

materials gives the Company a significant cost advantage in the marketplace
and enables it to source many grades of feedstocks at competitive prices.

- - New Product Development. The Company's research and new product development
personnel in North America and Finland work closely with its customers to
develop new products to meet changing industry needs and customer
requirements. The Company estimates that products introduced over the last
five years represented nearly 10% of the Company's 1997 net sales.

- - Experienced Management. The Company's management has an average of over
twenty years' experience in the chemical industry. This management team has
consistently delivered strong operating performance and has successfully
integrated the operations of acquired companies as demonstrated by increasing
income from operations and net income in each of the last five fiscal years.

GROWTH STRATEGIES

The Company believes that additional opportunities for earnings growth are
available through the following:

- - Targeting High Growth Applications. The Company targets applications that it
believes have high growth potential for its products. For example, the
Company's cobalt and nickel products are incorporated in rechargeable
batteries; its stainless steel powders are used in automotive pressed metal
parts; and, through its recent acquisition of Auric Corporation ("Fidelity"),
the Company's electroless nickel products are used in the manufacture of
memory disks for computers and other information storage devices.

- - Focusing on Value-Added Products. The Company focuses on increasing sales of
value-added products through its research, technology and customer driven
focus. For example, the Company has increased its sales of cobalt extra-fine
powders and created market opportunities in tungsten powder by applying its
recycling technology to the needs of its customers in the hard metal tool
industry.

- - Expanding Sales of Existing Products to Additional Markets. The Company seeks
to reach additional markets for its existing products by expanding its
geographical presence through a growing international sales force. The Company
also seeks cross-selling opportunities across its broad customer base.

- - Pursuing Strategic Acquisitions. The Company selectively pursues acquisitions
that are complementary to its existing product lines, markets and geographic
presence and that leverage its current technology and production capabilities
in metal-based chemicals and powders. For example, the acquisitions of SCM and
Fidelity leverage the Company's capabilities in metal powders and nickel-based
chemicals, respectively.

- - Supporting Market Opportunities through Internal Investment. The Company
expands capacity and production capability to take advantage of growing and
newly emerging markets. Its current investments include expanding capacity and
production capability in a number of cobalt and copper-based products.

RECENT DEVELOPMENTS

ACQUISITIONS

The Company completed the following acquisitions in the first quarter of
1998 that leverage its current technology and production capabilities:

On January 30, 1998, the Company acquired Fidelity (the "Fidelity
Acquisition"). The total consideration paid by the Company for Fidelity was
$80.0 million. Fidelity is a leading producer of electroless nickel for memory
disks and also produces electroplating chemicals and metal concentrates used in
metal finishing and other specialty applications. The use of electroless nickel
is forecasted to grow rapidly both in the hard disk industry and in general
industrial applications, primarily because of the increasing demand for
information storage devices. Fidelity's state of the art technology and existing
customer base make it well-positioned to capitalize on these market
opportunities. In addition, Fidelity provides the Company with the ability to
leverage its existing nickel sulphate production. For the fiscal year ended
September 30, 1997, Fidelity had revenues of approximately $48 million.

5
<PAGE> 6

In February 1998, the Company acquired Dussek Campbell Limited ("Dussek")
for approximately $13 million (the "Dussek Acquisition" and, together with the
Fidelity Acquisition, the "Acquisitions"), a Canadian manufacturer of metal
carboxylates with product lines similar to those of the Company. For the fiscal
year ended December 31, 1997, Dussek had revenues of approximately $12 million.
The Company believes that Dussek will enable it to expand its customer base and
allow it to serve its existing customers more efficiently.

In connection with the foregoing Acquisitions, which were accounted for as
purchases, the Company's revolving credit facility was increased from $180.0
million to $250.0 million in January 1998.

In April 1998, the Company acquired the carbothermal reduction technology
and assets of Dow Chemical Company for approximately $12.5 million, plus a
conditional amount up to $20 million based upon the achievement of certain
performance targets, which would be paid at the end of five years. This
acquisition will complement the Company's present tungsten recycling capability
investment, allow it to better serve its existing customer base in the hard
metal tool industry, and provide for the possibility of expanding this
technology to other metal powders and product applications.

THE OFFERING

Common Stock offered by the Company............... 1,750,000 shares(1)

Common Stock outstanding after the Offering....... 23,828,098 shares(1)(2)

Use of Proceeds................................... The net proceeds received by
the Company from the
Offering will be used to
reduce indebtedness. See
"Use of Proceeds."

NYSE Symbol....................................... OMP
- ------------------------------

(1) Excludes 262,500 shares that may be issued by the Company upon the exercise
of the over-allotment option granted to the Underwriters. See
"Underwriting."

(2) Excludes 1,299,571 shares of Common Stock reserved for issuance upon the
exercise of stock options granted under the Company's stock option plans.

6
<PAGE> 7

SUMMARY FINANCIAL INFORMATION

The following table sets forth selected historical financial information of
the Company as of and for each of the years ended December 31, 1995, 1996 and
1997 and as of and for the three months ended March 31, 1997 and 1998. See
"Selected Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
------------------------------- -----------------------------------
1995 1996 1997(1) MARCH 31, 1997 MARCH 31, 1998(2)
------ ------ ------- -------------- -----------------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales.................. $361.0 $388.0 $487.3 $110.1 $138.1
Gross profit............... 74.6 84.0 117.4 26.6 34.6
Selling, general and
administrative
expenses................ 30.6 32.6 46.8 10.9 14.1
Income from operations..... 44.0 51.4 70.6 15.7 20.5
Other expense -- net....... (5.5) (7.0) (12.6) (3.4) (3.7)
Net income................. $ 25.9 $ 30.0 $ 38.4 $ 8.2 $ 11.2
Net income per common
share................... $ 1.39 $ 1.61 $ 1.84 $ 0.44 $ 0.51
Net income per common
share -- assuming
dilution................ $ 1.36 $ 1.56 $ 1.78 $ 0.43 $ 0.49
% Growth.............. 24.8% 14.7% 14.1% 16.2% 14.0%

BALANCE SHEET DATA:
Total assets............... $358.0 $443.5 $601.1 $593.0 $701.4
Long-term debt(3).......... 89.8 109.3 170.3 259.3 284.4
Stockholders' equity....... 161.4 185.3 301.2 191.9 309.8

OTHER DATA:
Capital expenditures....... $ 31.2 $ 28.1 $ 34.4 $ 7.9 $ 16.4
Depreciation and
amortization............ 13.7 15.8 21.2 5.0 6.5

PRODUCTS SOLD:
(millions of pounds)
Carboxylates............... 39.7 43.1 50.3 11.7 14.4
Salts...................... 46.4 50.7 61.0 14.8 21.7
Powders.................... 2.4 2.9 38.6 7.9 10.8
------ ------ ------ ------ ------
Total...................... 88.5 96.7 149.9 34.4 46.9
====== ====== ====== ====== ======
</TABLE>

- ---------------

(1) The Company acquired SCM Metal Products, Inc. ("SCM") on January 21, 1997.

(2) The Company completed the Fidelity Acquisition on January 30, 1998 and the
Dussek Acquisition on February 3, 1998.

(3) Excludes current portion of long-term indebtedness.

7
<PAGE> 8

RISK FACTORS

Prospective investors in the Common Stock should carefully review the
information contained elsewhere in this Prospectus and should particularly
consider the following matters.

RAW MATERIAL PRICES AND SUPPLY

The primary raw materials used by the Company in manufacturing products are
cobalt, nickel and copper. The cost of raw materials fluctuates due to actual or
perceived changes in supply and demand. Generally, the Company is able to pass
through to its customers increases and decreases in raw material prices by
increasing or decreasing, respectively, the prices of its products. The degree
of profitability of the Company depends, in part, on the Company's ability to
maintain the differential between its product and raw material prices.

While nickel and copper are worldwide commodities and generally available,
cobalt availability can be more uncertain. The Company's supply of cobalt has
historically been sourced primarily from the Democratic Republic of Congo,
Australia, Finland and Zambia. Although the Company has never experienced a
material shortage of cobalt, production problems and political and civil
instability in certain supplier countries may affect the supply and market price
of cobalt. If a substantial interruption should occur in supply from a primary
source, there is no assurance that the Company would be able to obtain as much
cobalt from other sources as would be necessary to satisfy the Company's
requirements at prices comparable to its current arrangements.

ENVIRONMENTAL MATTERS

Manufacturers of specialty chemical products, including the Company, are
subject to stringent laws and regulations relating to the storage, handling,
disposal, emission and discharge of materials into the environment.
Manufacturers of specialty chemicals, including the Company, have expended, and
may be required to expend in the future, substantial funds for compliance with
such laws and regulations. In addition, claims for personal injury, property
damages or natural resource damages may be made by third parties or regulators.
Annual environmental compliance costs of the Company were approximately $3.0
million in 1997. In addition, the Company anticipates capital expenditures of
approximately $3.0 million in 1998 in connection with ongoing environmental
compliance.

Some risk of environmental liability is inherent in the nature of the
Company's business and in the ownership and operation of real property, and
there is no assurance that additional material environmental costs will not
arise in the future. In addition, environmental considerations may affect
customer acceptance of certain of the Company's products. Based on presently
available information, however, the Company does not currently anticipate any
material adverse effect on its results of operations, financial condition, or
competitive position as a result of compliance with environmental requirements,
environmental liability or the impact of environmental considerations on the
marketability of its products. See "Business--Environmental Matters."

ACQUISITIONS AND JOINT VENTURES

As part of its business strategy, the Company continues to pursue strategic
acquisitions and joint ventures that would leverage its current technology and
production capability for metal-based specialty chemicals and powders.
Identifying and pursuing future acquisition and joint venture opportunities and
integrating acquired products and businesses will require a significant amount
of management time and skill. There can be no assurance that the Company will be
able to identify suitable acquisition candidates, or finance (through available
cash flow and/or additional debt or equity financing), consummate or assimilate
such acquisitions.

8
<PAGE> 9

FOREIGN EXCHANGE

In addition to the United States, the Company has manufacturing and other
facilities in Canada, Europe and Asia Pacific, and markets its products
worldwide. Although most of the Company's raw material purchases and product
sales are transacted in U.S. dollars, liabilities for non-U.S. operating
expenses and income taxes are denominated in local currencies. Accordingly,
fluctuations in currency prices may affect the Company's operating results and
net income. In order to partially hedge its balance sheet exposure to
fluctuating rates, the Company enters into forward contracts to purchase Finnish
Markka.

FOREIGN COUNTRY OPERATING RISKS

In June 1997, the Company signed contracts as a partner with La Generale
des Carrieres et des Mines and Groupe George Forrest S.A. to build a smelter in
Lubumbashi, Democratic Republic of Congo. The Company's approximately $40
million share of the $80 million project will be funded over the two year
construction period through cash generated by operations and the Company's
credit facility. As of March 31, 1998, the Company has spent approximately $7
million in connection with this project. Annual production from this facility is
estimated to contain approximately 5,000 metric tons of cobalt. The cost of the
cobalt obtained will be based upon prevailing market prices as material is
processed.

The Company has also entered into a supply agreement with La Generale des
Carriers et des Mines to purchase all of the concentrate produced by the
Luiswishi mine in Shaba, Democratic Republic of Congo through 1999. Annual
production from this facility is estimated to contain approximately 4,000 metric
tons of cobalt and 8,000 metric tons of copper. The cost of the cobalt and
copper obtained will be based upon prevailing market prices as material is
processed.

The Company is subject to a number of risks inherent in these international
operations, including unexpected changes in regulatory requirements, the costs
and burdens of complying with foreign laws, and political and economic
instability. There can be no assurance that the foregoing factors will not have
a material adverse effect on the Company's future results of operations.

CERTAIN ANTI-TAKEOVER EFFECTS

The Company's certificate of incorporation and by-laws contain certain
provisions that may be deemed to have anti-takeover effects. These provisions
include a classified Board of Directors (the "Board"), the elimination of the
ability of stockholders to act by written consent in lieu of a meeting and the
ability of the Board to establish one or more series of preferred stock, having
such number of shares, designations, relative voting rights, dividend rates,
liquidation and other rights, preferences and limitations as the Board may fix,
without further stockholder approval. In addition, in November of 1996, the
Board adopted a Stockholders' Rights Plan pursuant to which the Board declared a
dividend distribution of one Right for each outstanding share of Common Stock of
the Company. The Stockholders' Rights Plan and the other provisions discussed
above may be deemed to have anti-takeover effects because they may delay, defer
or prevent an unsolicited acquisition proposal that some, or a majority, of the
stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their Common Stock over the then market
price of such shares.

FORWARD-LOOKING INFORMATION

The Company is making this statement in order to satisfy the "safe harbor"
provisions contained in the Private Securities Litigation Reform Act of 1995.
The preceding discussion of risk factors and Management's Discussion and
Analysis of Financial Condition and Results of Operations include
forward-looking statements relating to the business of the Company. Such
forward-looking statements are subject to uncertainties and factors relating to
the Company's operations and business environment, all of which are difficult to
predict and many of which are beyond the control of the Company, that could
cause actual results of the Company to differ materially from those matters
expressed in or implied by such forward-looking statements. The Company believes
that the following factors, among others, could affect its future performance
and cause actual results of the Company to differ materially from those
expressed in or implied by forward-looking statements made by or on behalf of
the

9
<PAGE> 10

Company: (a) the price and supply of raw materials, particularly cobalt, copper
and nickel; (b) demand for metal-based specialty chemicals in the mature markets
in the United States and Europe; (c) demand for metal-based specialty chemicals
in Asia Pacific and other less mature markets, which geographic areas are an
announced focus of the Company's activities; (d) the effect of non-currency
risks of investing in and conducting operations in foreign countries, together
with fluctuations in currency exchange rates upon the Company's international
operations, including those relating to political, social, economic and
regulatory factors; and (e) the availability and cost of personnel trained in
Year 2000 modifications and the ability to locate and correct all relevant
computer codes.

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<PAGE> 11

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Common Stock, after
the deduction of commissions payable to the Underwriters and other expenses of
this Offering, will be approximately $68.4 million (approximately $78.7 million
if the over-allotment option is exercised in full). The Company intends to
utilize the net proceeds of the Offering to repay outstanding indebtedness under
its revolving credit facility. The revolving credit facility, which matures in
2003, is with certain lenders led by National City Bank ("NCB") and has variable
interest rates based upon, at the Company's option, either (i) NCB's base rate
or (ii) LIBOR, plus a margin ranging from .40% to .80%.

PRICE RANGE OF COMMON STOCK AND DIVIDENDS

The Company's Common Stock began trading on the New York Stock Exchange
("NYSE") under the symbol "OMP" on December 4, 1996. Prior to that time, the
Common Stock was traded on the Nasdaq National Market System ("Nasdaq") under
the symbol "OMGI." The following table sets forth for the calendar quarters
indicated the high and low sale prices for the Common Stock as reported on the
NYSE Composite Tape or Nasdaq, as the case may be, and the dividends per share
paid in such quarters. The information provided below has been adjusted to give
effect to the three-for-two split of the Company's Common Stock approved by the
Board in November 1996. The last reported sale price of the Common Stock on the
NYSE Composite Tape on June 29, 1998, was $42 1/16 per share.

<TABLE>
<CAPTION>
PRICE RANGE
OF COMMON
STOCK DIVIDENDS
------------- PAID
HIGH LOW PER SHARE
---- --- ---------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
1st Quarter.................................... $25 1/8 $21 5/8 $0.07
2nd Quarter.................................... 28 24 1/2 0.07
3rd Quarter.................................... 27 3/8 22 3/4 0.07
4th Quarter.................................... 28 3/4 25 3/8 0.07

YEAR ENDED DECEMBER 31, 1997:
1st Quarter.................................... $31 3/8 $26 1/4 $0.08
2nd Quarter.................................... 33 1/4 25 3/4 0.08
3rd Quarter.................................... 39 15/16 33 3/16 0.08
4th Quarter.................................... 41 1/4 35 1/16 0.08

YEAR ENDED DECEMBER 31, 1998:
1st Quarter.................................... $46 $35 5/16 $0.09
2nd Quarter through June 29, 1998.............. 45 7/8 38 3/8 0.09
</TABLE>

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<PAGE> 12

CAPITALIZATION

The following table sets forth the Company's capitalization as of March 31,
1998, as adjusted to reflect the application of the net proceeds from the sale
of the Common Stock as described under "Use of Proceeds." The following
information should be read in conjunction with the Company's consolidated
financial statements and notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
----------------------------------
AS ADJUSTED
ACTUAL FOR THE OFFERING
------------ -------------------
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C>
Long-term debt:(1)
Notes payable to banks.................................... $ 224.0 $ 155.6
Notes payable to insurance companies...................... 60.0 60.0
Other..................................................... 0.6 0.6
-------- --------
Total long-term debt................................... 284.6 216.2
-------- --------
Stockholders' equity:
Preferred stock........................................... -- --
Common stock.............................................. 0.2 0.2
Capital in excess of par value............................ 189.3 257.7
Retained earnings......................................... 126.2 126.2
Treasury stock............................................ (5.2) (5.2)
Foreign currency translation adjustments.................. (0.7) (0.7)
-------- --------
Total stockholders' equity............................. 309.8 378.2
-------- --------
Total capitalization........................................ $ 594.4 $ 594.4
======== ========
</TABLE>

- ---------------

(1) Includes current portion of long-term indebtedness of $0.2 million.

12
<PAGE> 13

SELECTED FINANCIAL DATA

Set forth below are selected historical financial data for the Company as
of and for its last five fiscal years and as of and for the three months ended
March 31, 1997 and 1998. This information should be read in conjunction with the
consolidated financial statements of the Company and the related notes thereto
included elsewhere in this Prospectus and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, ----------------------
---------------------------------------------- MARCH 31, MARCH 31,
1993 1994 1995 1996 1997(1) 1997 1998(2)
------ ------ ------ ------ ------- --------- ---------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales....................... $179.5 $251.3 $361.0 $388.0 $487.3 $110.1 $138.1
Cost of products sold........... 133.7 190.7 286.4 304.0 369.9 83.5 103.5
------ ------ ------ ------ ------ ------ ------
Gross profit.................... 45.8 60.6 74.6 84.0 117.4 26.6 34.6
Selling, general and
administrative expenses....... 20.7 25.4 30.6 32.6 46.8 10.9 14.1
------ ------ ------ ------ ------ ------ ------
Income from operations.......... 25.1 35.2 44.0 51.4 70.6 15.7 20.5
Other income (expense)
Interest expense................ (3.9) (3.2) (5.5) (7.5) (13.4) (3.7) (4.0)
Interest income................. 0.5 0.4 0.4 0.3 0.1 0.0 0.1
Foreign exchange gain (loss).... 1.4 (1.4) (0.4) 0.2 0.7 0.3 0.2
------ ------ ------ ------ ------ ------ ------
Other income (expense), net..... (2.0) (4.2) (5.5) (7.0) (12.6) (3.4) (3.7)
------ ------ ------ ------ ------ ------ ------
Income before income taxes...... 23.1 31.0 38.5 44.4 58.0 12.3 16.8
Income taxes.................... 7.7 10.3 12.6 14.4 19.6 4.1 5.6
------ ------ ------ ------ ------ ------ ------
Net income...................... $ 15.4 $ 20.7 $ 25.9 $ 30.0 $ 38.4 $ 8.2 $ 11.2
====== ====== ====== ====== ====== ====== ======
Net income per common share..... $ 0.97 $ 1.11 $ 1.39 $ 1.61 $ 1.84 $ 0.44 $ 0.51
Net income per common share --
assuming dilution............. $ 0.95 $ 1.09 $ 1.36 $ 1.56 $ 1.78 $ 0.43 $ 0.49
Dividends declared and paid per
common share.................. -- $ 0.19 $ 0.24 $ 0.28 $ 0.32 $ 0.08 $ 0.09
OTHER DATA:
Capital expenditures............ $ 8.7 $ 19.7 $ 31.2 $ 28.1 $ 34.4 $ 7.9 $ 16.4
Depreciation and amortization... 9.6 10.7 13.7 15.8 21.2 5.0 6.5
PRODUCTS SOLD:
(millions of pounds)
Carboxylates.................... 32.7 37.0 39.7 43.1 50.3 11.7 14.4
Salts........................... 36.3 42.9 46.4 50.7 61.0 14.8 21.7
Powders......................... 1.0 1.6 2.4 2.9 38.6 7.9 10.8
------ ------ ------ ------ ------ ------ ------
Total........................... 70.0 81.5 88.5 96.7 149.9 34.4 46.9
====== ====== ====== ====== ====== ====== ======
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
---------------------------------------------- ----------------------
1993 1994 1995 1996 1997(1) 1997 1998(2)
------ ------ ------ ------ ------- --------- ---------
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................. $ 75.1 $ 82.6 $147.0 $173.9 $224.1 $219.3 $260.6
Total assets.................... 217.3 278.0 358.0 443.5 601.1 593.0 701.4
Long-term debt(3)............... 30.6 46.6 89.8 109.3 170.3 259.3 284.4
Stockholders' equity............ 124.9 141.2 161.4 185.3 301.2 191.9 309.8
</TABLE>

- ---------------

(1) The Company acquired SCM Metal Products, Inc. ("SCM") on January 21, 1997.

(2) The Company completed the Fidelity Acquisition on January 30, 1998 and the
Dussek Acquisition on February 3, 1998.

(3) Excludes current portion of long-term indebtedness.

13
<PAGE> 14

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

The primary raw materials used by the Company in manufacturing its products
are cobalt, nickel and copper. The degree of profitability of the Company
depends, in part, on the Company's ability to maintain the differential between
its product prices and raw material prices. Typically, the Company's products
represent a small portion of the customer's total cost of manufacturing or
processing, but are essential for superior product performance. Generally, the
Company is able to pass along to its customers increases and decreases in raw
material prices by increasing or decreasing, respectively, the prices of its
products. The timing and amount of such adjustments in its product prices
depends upon the type of product sold and the inventories and market share
positions of the Company and its competitors.

Because certain of the Company's products are sold at a relatively fixed
dollar amount over raw material costs, the Company's percentage gross margins
can increase or decrease with increases or decreases in raw material prices.
When raw material prices increase, percentage gross margins contract.
Conversely, when raw material prices decrease, percentage gross margins expand.
The Company focuses on increasing the dollar amount of its gross profit by
managing its product mix, volumes, selling prices, raw material costs and
operating expenses.

RESULTS OF OPERATIONS

The following discussion of results of operations should be read in
conjunction with the financial statements of the Company and the notes thereto
appearing elsewhere in this Prospectus.

Three Months Ended March 31, 1998 Compared to Three Months Ended March 31,
1997

Net sales for the three months ended March 31, 1998 were $138.1 million, an
increase of 25.5% compared to the same period for 1997. The increase in sales
resulted principally from an increase in physical volume of products sold and
the Fidelity Acquisition.

Cobalt market prices ranged from $18 to $20 per pound during the three
month period ended March 31, 1998 compared to a range of $19 to $22 per pound
during the same period in 1997. The market price of nickel ranged from $2.37 to
$2.69 per pound during the same three months ended March 31, 1998 compared to
$2.88 to $3.66 per pound during the same period in 1997.

Pounds of product sold by the Company were approximately 46.9 million
pounds in the three month period ended March 31, 1998, compared to 34.4 million
pounds in the same period in 1997. The increase in physical volume of
carboxylate product sold reflects 1.2 million pounds of product sold as a result
of the Dussek Acquisition and increased sales of carboxylates in Europe. The
increase in physical volume of salt products sold reflects 5.5 million pounds of
nickel salt products sold as a result of the Fidelity Acquisition. The increase
in physical volume of powder products sold reflects 3.0 million pounds of copper
powder products sold as a result of the acquisition of SCM, which occurred at
the end of January 1997.

Gross profit increased to $34.6 million for the three month period ended
March 31, 1998, a 30.3% increase over the same period in 1997. The improvement
in gross profit was primarily the result of higher physical volumes of product
sold. Cost of products sold decreased to 74.9% for the three months ended March
31, 1998 from 75.9% of net sales during the same period of 1997 primarily
because of improved product mix.

Selling, general and administrative expenses increased to 10.2% of net
sales for the first three months of 1998 compared to 9.9% of net sales in the
same period in 1997 primarily due to the Fidelity Acquisition.

Other expense in 1998 was $3.7 million compared to $3.4 million in 1997,
due primarily to increased interest expense on higher outstanding borrowings as
a result of the Fidelity Acquisition.

Income taxes as a percentage of income before income taxes remained
approximately the same at 33.7% for the first three months of 1998 compared to
33.4% in the same period in 1997.

14
<PAGE> 15

Net income for the three month period ended March 31, 1998 was $11.2
million, an increase of $3.0 million from the same period in 1997, due to the
aforementioned factors.

Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

Net sales for 1997 were $487.3 million, an increase of 25.6% compared to
1996. The increase in sales resulted principally from the January 1997
acquisition of SCM and an increase in physical volume of products sold, which
offset a decline in the Company's product prices resulting from decreasing
cobalt market prices.

Cobalt market prices ranged from $18 to $26 per pound during 1997 compared
to $20 to $32 per pound during 1996. The market price of nickel ranged from
$2.66 to $3.66 per pound during 1997 compared to $2.92 to $3.78 per pound during
1996.

Pounds of product sold by the Company were approximately 149.9 million
pounds during 1997 compared to 96.7 million pounds in 1996. The increase in
carboxylate products sold resulted from higher sales in all market regions. The
increase in physical volume of salt and powder products sold primarily reflects
the addition of copper salt and powder products sold, as a result of the SCM
acquisition.

Gross profit increased to $117.4 million in 1997, a 39.8% increase from
1996. The improvement in gross profit was primarily the result of the
acquisition of SCM, higher physical volume of products sold, and changes in
product mix. Cost of products sold decreased to 75.9% of net sales for the year
ended 1997 from 78.4% of net sales in 1996 primarily because of lower cobalt
market prices and the acquisition of SCM.

Selling, general and administrative expenses increased to 9.6% of net sales
in 1997 from 8.4% of net sales in 1996, primarily as a result of the acquisition
of SCM.

Other expense was $12.6 million in 1997 compared to $7.0 million in 1996
due primarily to increased interest expense on higher outstanding borrowings
associated with the acquisition of SCM, offset by gains on foreign exchange.

Income taxes as a percentage of income before income taxes increased to
33.7% in 1997 from 32.3% in 1996 due primarily to the non-tax deductible
goodwill related to the acquisition of SCM.

Net income for 1997 was $38.4 million, an increase of $8.4 million from
1996, primarily due to the aforementioned factors.

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

Net sales for 1996 were $388.0 million, an increase of 7.5% compared to
1995. The increase in sales resulted principally from increases in physical
volume of products sold and from changes in product mix, more than offsetting a
decline in the Company's product prices resulting from decreasing cobalt market
prices.

Cobalt market prices ranged from $20 to $32 per pound during 1996 compared
to $27 to $32 per pound during 1995. The market price of nickel ranged from
$2.92 to $3.78 per pound during 1996 compared to $3.17 to $4.57 per pound during
1995.

Pounds of product sold by the Company were approximately 96.7 million
pounds during 1996 compared to 88.5 million pounds in 1995. The increase in
carboxylate products sold resulted principally from higher sales in Europe. The
increase in salt products resulted principally from higher sales of cobalt based
products. The increase in powders sold resulted principally from higher sales of
coarse grade powders.

Gross profit increased to $84.0 million in 1996, a 12.6% increase from
1995. The improvement in gross profit was primarily the result of higher
physical volume of cobalt based products sold. Cost of products sold decreased
to 78.4% of net sales for the year ended 1996 from 79.3% of net sales in 1995
primarily because of lower cobalt market prices.

Selling, general and administrative expenses remained approximately the
same at 8.4% of net sales in 1996 and 1995.

15
<PAGE> 16

Other expenses were $7.0 million in 1996 compared to $5.5 million in 1995
due primarily to increased interest expense on higher outstanding borrowings,
offset by gains on foreign exchange.

Income taxes as a percentage of income before income taxes decreased to
32.3% in 1996 from 32.7% in 1995 as a greater percentage of total income was
earned in Finland, which has a lower statutory tax rate (28%) than in the United
States.

Net income for 1996 was $30.0 million, an increase of $4.1 million from
1995, primarily due to the aforementioned factors.

LIQUIDITY AND CAPITAL RESOURCES

During the three month period ended March 31, 1998, the Company's net
working capital increased by approximately $36 million. This increase was
primarily the result of additional working capital associated with the
acquisitions of Fidelity and Dussek. Capital expenditures increased in 1998,
primarily due to expansion at various plant facilities. These increased cash
needs were funded through cash generated by operations as well as additional
borrowings under the Company's revolving credit facility.

During 1997, the Company's net working capital increased by approximately
$50 million. This increase was primarily the result of a decrease in accounts
payable from payments on certain raw materials and additional working capital
acquired in the purchase of SCM. Capital expenditures increased over the prior
year primarily due to plant expansion at various locations. These increased cash
needs were funded through cash generated by operations as well as additional
borrowings under the Company's revolving credit facility and private placements
with insurance companies.

The Company has ongoing capital expenditure programs to improve its
processing technology and plant and equipment, and to expand capacity to
accommodate its substantial growth. The Company anticipates that capital
spending, exclusive of acquisitions or joint ventures, will approximate $50
million per year through 1998 and 1999.

The Company believes that it will have sufficient cash generated by
operations and through its credit facility to provide for its future working
capital and capital expenditure requirements and to pay quarterly dividends on
its common stock, subject to the Board's discretion. In February 1998, the Board
authorized an increase in quarterly dividends to $0.09 per share. Subject to
certain limitations in its credit facility, the Company may incur additional
borrowings under this line to finance working capital and certain capital
expenditures, including, without limitation, the purchase of additional raw
materials.

The Company's revolving credit facility was revised to increase available
credit to $250 million in January 1998 in connection with the Acquisitions. In
addition, the revisions to the credit facility expanded its sources of capital
by adding two new lending institutions.

In order to convert to a fixed rate and extend the term on a portion of its
borrowings, during October 1997, the Company borrowed $30 million in a private
placement with a group of insurance companies and used the proceeds to reduce
borrowings under its revolving credit facility.

In April 1997, the Company sold 3,450,000 shares of its Common Stock at
$26.75 per share in a public offering. The net proceeds of the offering, in the
amount of $87.0 million, were used to pay down a portion of the debt incurred in
acquiring SCM.

Although most of the Company's raw material purchases and product sales are
transacted in U.S. dollars, liabilities for non-U.S. operating expenses and
income taxes are denominated in local currencies. Accordingly, fluctuations in
currency prices will affect the Company's operating results and net income.
Specifically, when the

16
<PAGE> 17

Finnish Markka weakens against the U.S. dollar, there is a net favorable effect
on the Company due to lower operating expenses and lower net balance sheet
liabilities when translated into U.S. dollars. The reverse is true when the
Finnish Markka strengthens against the U.S. dollar. In order to partially hedge
its balance sheet exposure to fluctuating rates, the Company enters into forward
contracts to purchase Finnish Markka.

YEAR 2000

The Company presently believes that with modifications to existing computer
software and conversions to new software, the Year 2000 Issue will not pose
significant operational problems to its normal business activities.

The Company anticipates completing its Year 2000 project by December 31,
1998, which is prior to any anticipated impact on its operating systems. This
project will be completed using a combination of existing internal and external
resources. The total cost of the Year 2000 project is estimated at $2.5 million
and is being funded through operating cash flows. Of the total project cost,
approximately $0.8 million is attributable to a new software purchase, which
will be capitalized. The remaining $1.7 million, which will be expensed as
incurred, is not expected to have a material effect on the results of operations
of the Company.

17
<PAGE> 18

BUSINESS

HISTORY

The Company was formed in 1991 to effect the combination of Mooney
Chemicals, Inc., now known as OMG Americas, Inc. ("OMG Americas"), Kokkola
Chemicals Oy ("KCO") and Vasset, S.A. ("Vasset"), which are long established
companies operating in the United States, Finland and France, respectively. KCO
and Vasset were previously wholly owned subsidiaries of Outokumpu Oy, a Finnish
corporation ("Outokumpu Oy"). OMG Americas entered the carboxylates business in
1946 and the cobalt salts business in 1983. Outokumpu Oy began manufacturing
cobalt powders in 1967. In 1983, a predecessor company of KCO entered the cobalt
and nickel-based salts business and, in 1990, the carboxylates business through
the acquisition of Vasset, an established manufacturer and marketer of organic
compounds of cobalt and other metals used primarily in the tire industry.

This business combination (the "Combination"), which created a company with
an international presence, was designed to take advantage of complementary
technical and manufacturing strengths, market positions, product ranges and raw
material sources. Since the Combination, the Company has achieved the following:

(i) implemented new refining technology to lower raw material costs
and increased physical volumes of products sold, simultaneously
strengthening its position as a supplier of cobalt based specialty
chemicals and as a buyer of cobalt raw materials;

(ii) focused and expanded its regional product strengths
geographically, specifically expanding salts from Europe into the U.S.,
carboxylates from the U.S. into Europe, and salts, carboxylates and powders
into Asia Pacific;

(iii) introduced new products focused on new applications or market
segments such as PVC heat stabilizers and rechargeable battery chemicals;
and

(iv) expanded geographic scope and product offerings through joint
ventures and acquisitions.

THE COMPANY

18
<PAGE> 19

COMPETITIVE STRENGTHS

The Company benefits from the following competitive strengths:

GROWTH STRATEGIES

The Company believes that additional opportunities for earnings growth are
available through the following:

- - Targeting High Growth Applications. The Company targets applications that it
believes have high growth potential for its products. For example, the
Company's cobalt and nickel products are incorporated in rechargeable
batteries; its stainless steel powders are used in automotive pressed metal
parts; and, through its acquisition of Fidelity, the Company's electroless
nickel products are used in the manufacture of memory disks for computers and
other information storage devices.

- - Focusing On Value-Added Products. The Company focuses on increasing sales of
value-added products through its research, technology and customer driven
focus. For example, the Company has increased its sales of cobalt extra-fine
powders and created market opportunities in tungsten powder by applying its
recycling technology to the needs of its customers in the hard metal tool
industry.

- - Pursuing Strategic Acquisitions. The Company selectively pursues acquisitions
that are complementary to its existing product lines, markets and geographic
presence that leverage its current technology and production

19
<PAGE> 20

capabilities in metal-based chemicals and powders. For example, the
acquisitions of SCM and Fidelity leverage the Company's capabilities in metal
powders and nickel-based chemicals, respectively.

- - Supporting Market Opportunities through Internal Investments. The Company
expands capacity and production capability to take advantage of growing and
newly emerging markets. Its current investments include expanding capacity and
production capability in a number of cobalt and copper based products.

ACQUISITIONS AND JOINT VENTURES

In June 1997, the Company signed contracts as a partner with La Generale
des Carrieres et des Mines and Groupe George Forrest S.A. to build a smelter in
Lubumbashi, Democratic Republic of Congo. The Company's approximately $40
million share of the $80 million project will be funded over the two year
construction period through cash generated by operations and the Company's
credit facilities. As of March 31, 1998, the Company has spent approximately $7
million in connection with this project. Annual production from this facility is
estimated to contain approximately 5,000 metric tons of cobalt. The cost of the
cobalt obtained will be based upon the prevailing market price as material is
processed.

On January 30, 1998, the Company acquired Fidelity. The total consideration
paid by the Company for Fidelity was $80.0 million. Fidelity is a leading
producer of electroless nickel for memory disks and also produces electroplating
chemicals and metal concentrates used in metal finishing and other specialty
applications. The use of electroless nickel is forecasted to grow rapidly both
in the hard disk industry and in general industrial applications, primarily
because of the increasing demand for information storage devices. Fidelity's
state of the art technology and existing customer base make it well-positioned
to capitalize on these market opportunities. Fidelity possesses a dominant
market share for electroless nickel where its technology provides it with a
competitive advantage. In addition, the acquisition of Fidelity gives the
Company the ability to leverage its existing nickel sulphate production. For the
fiscal year ended September 30, 1997, Fidelity had revenues of approximately $48
million.

In February 1998, the Company acquired Dussek for approximately $13
million. Dussek is a Canadian manufacturer of metal carboxylates with product
lines similar to those of the Company. For the fiscal year ended December 31,
1997, Dussek had revenues of approximately $12 million. The Company believes
that Dussek will enable it to expand its customer base and allow it to serve its
existing customers more efficiently.

In April 1998, the Company acquired the carbothermal reduction technology
and assets of Dow Chemical Company for approximately $12.5 million, plus a
conditional amount up to $20 million based upon the achievement of certain
performance targets, which would be paid at the end of five years. This
acquisition will complement the Company's present tungsten recycling capability,
allow it to better serve its existing customer base in the hard metal tool
industry, and provide for the possibility of expanding this technology to other
metal powders and product applications.

PRODUCTS AND MARKETS

The following is a discussion of the Company's products and markets.

Metal Carboxylates. The Company believes it is the world's leading
manufacturer and marketer of cobalt carboxylates and produces over 200
carboxylate products. In addition to cobalt products, the Company manufactures
carboxylates using a variety of other metals, including barium, calcium, copper,
manganese, molybdenum, nickel, potassium, zinc and zirconium. Metal carboxylates
are essential components in numerous complex chemical and industrial processes,
and are used in many end markets, such as coatings, custom catalysts, liquid
detergents, lubricants and fuel additives, plastic stabilizers, polyester
promoters and adhesion promoters for rubber tires. Examples of specific
applications include the use of additives to optimize the drying process in
paints and enamels, fuel additives to improve combustion and suppress smoke,
rubber adhesion promoters to improve the bonding of rubber to steel-belted tires
and lubricant additives to improve fuel efficiency.

The Company produces metal carboxylates at its manufacturing facilities in
North America and Europe. Metal carboxylates are sold to customers in the
Americas, Europe and Asia Pacific. Sales of metal carboxylates accounted for
approximately $127 million, or approximately 26% of the Company's 1997 net
sales. The

20
<PAGE> 21

following table sets forth certain information concerning the Company's end
markets for metal carboxylates and representative attributes of metal
carboxylates:

<TABLE>
<CAPTION>
END MARKETS ATTRIBUTES
----------- ----------
<S> <C>
Coatings.................................... Promotes faster drying in such products as
house paints, both exterior and interior, as
well as industrial and marine coatings

Liquid Detergents........................... Catalyzes the detergent alcohol found in
liquid laundry soaps

Lubricating Oils............................ Enhances the performance of various
lubricating oils used in automobile engines,
generators and mining equipment by reducing
sludge build-up, preventing oxidation under
high pressure and reducing friction

Polyester Resins............................ Accelerates the curing of polyester resins
found in reinforced fiberglass boats,
storage tanks, bathrooms, sports equipment,
automobile and truck components

Polyvinyl Chloride (PVC).................... Mitigates the effect of heat on flexible PVC
in such products as medical tubing, garden
hoses, resilient flooring and shower
curtains

Printing Inks............................... Promotes faster drying in various printing
inks

Tires....................................... Promotes bonding of metal-to-rubber in
radial tires
</TABLE>

Metal Salts. The Company believes it is the world's leading manufacturer
and marketer of cobalt and nickel-based specialty salts and produces over 25
products in this category. The Company also produces copper salts. Metal salts
are used in a wide variety of end products including catalysts, colorants,
batteries, petroleum additives, magnetic media, memory disks, metal finishing
agents and a broad range of chemicals. Salts have several characteristics that
make them essential components in a wide range of industrial and chemical
processes. For example, cobalt oxide is ideal for use as a bonding agent for the
underlaying of enamels and ceramics which require uniform fine powder. Nickel
carbonate is suitable for electrogalvanizing steel to prevent corrosion. Copper
oxide has properties well suited for antifouling in marine paint applications.

The Company produces cobalt, nickel and copper salts principally at its
manufacturing facilities in North America and Finland for sale to customers in
the Americas, Europe and Asia Pacific. Sales of metal salts accounted for
approximately $214.3 million, or 44% of the Company's 1997 net sales. The
following table sets forth certain information concerning the Company's end
markets for metal salts and representative attributes of metal salts:

<TABLE>
<CAPTION>
END MARKETS ATTRIBUTES
----------- ----------
<S> <C>
Ceramics and Glassware...................... Provides color for pigments, earthenware and
glass and facilitates adhesion of porcelain
to metal

Household Appliances........................ Enhances metal-glass bonding in a variety of
household appliances

Magnetic Media.............................. Improves the recording quality of video and
audio tapes, and enhances the high screen
resolution properties in television sets

Memory Disks................................ Enhances information storage on disks and
computers

Petrochemical Refining...................... Reduces sulfur dioxide and nitrogen
emissions

Steel....................................... Improves rust resistance in auto and truck
bodies
</TABLE>

21
<PAGE> 22

<TABLE>
<CAPTION>
END MARKETS ATTRIBUTES
----------- ----------
<S> <C>
Synthetic Fibers............................ Improves the efficiency of chemical
processes used to manufacture synthetic
fibers

Paints...................................... Enhances antifouling in marine paints
</TABLE>

Metal Powders. The Company believes it is a leading producer of copper
powders and the world's second largest manufacturer of cobalt extra-fine
powders. The Company also manufactures iron, stainless steel and tungsten
powders. Cobalt extra-fine powders are among the most technically advanced metal
powder products. High specification metal powders have important characteristics
that make them essential components in a number of applications. Cobalt
extra-fine powders have very low oxygen levels, thereby avoiding brittleness,
and are used primarily to produce cemented carbides for mining and machine tools
and oil and gas drilling equipment, and diamond tools used in the construction,
quarrying and manufacturing industries as well as other hard metal applications.
Copper powders produce high strength, corrosion resistant, high performance
alloyed materials used in the military and aerospace industries.

The Company produces powders at its manufacturing facilities in Finland and
the United States for sale to customers in the Americas, Europe and Asia
Pacific. Sales of cobalt and copper powders accounted for approximately $146
million, or approximately 30% of the Company's 1997 net sales. The following
table sets forth certain information concerning the Company's end markets for
metal powders and representative attributes of metal powders:

<TABLE>
<CAPTION>
END MARKETS ATTRIBUTES
----------- ----------
<S> <C>
Construction Equipment...................... Strengthens and adds durability to diamond
cutting and drilling equipment used in
construction and quarrying

Cutting Tools............................... Strengthens and adds durability to mining
and machine cutting tools, as well as oil
and gas drilling equipment

Rechargeable Batteries...................... Improves the electrical conduction of
rechargeable batteries used in cellular
phones, video cameras, portable computers
and power tools

Bushings & Bearings......................... Enhances performance through porous, self-
lubricating bronze bearings for electric
motors and other industrial applications

Microelectronics............................ Reduces the solder bridging and enhances
solder joint strength for circuit boards and
brazing

Pressed Metal Parts......................... Prevents corrosion in automotive exhaust
systems

High-Tech Alloys............................ Strengthens and prevents corrosion of high
performance alloyed materials
</TABLE>

RAW MATERIAL PRICES AND SUPPLY

22
<PAGE> 23

of Congo, Australia, Finland and Zambia. Although the Company has never
experienced a material shortage of cobalt, production problems and political and
civil instability in certain supplier countries may affect the supply and market
price of cobalt. If a substantial interruption should occur in the supply from a
primary source, there is no assurance that the Company would be able to obtain
as much cobalt from other sources as would be necessary to satisfy the Company's
requirements at prices comparable to its current arrangements.

The Company attempts to mitigate changes in prices and availability by
maintaining adequate inventories and long-term supply relationships with a
variety of producers. The Company presently has contracted for the majority of
its anticipated cobalt needs through the year 2000. The largest of these
contracts is a supply agreement with La Generale des Carriers et des Mines to
purchase all of the concentrate produced by the Luiswishi mine in Shaba,
Democratic Republic of Congo through 1999. Annual production from this facility
is estimated to contain approximately 4,000 metric tons of cobalt and 8,000
metric tons of copper. The cost of the cobalt and copper obtained will be based
upon prevailing market prices as material is processed.

The following tables set forth the average quarterly per pound prices for
cobalt, nickel and copper for the last five years.

COBALT
AVG. QUARTERLY PRICE
1993-1997

<TABLE>
<CAPTION>
Measurement
Period
(Fiscal Year
Covered) 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
<S> <C> <C> <C> <C>
1993 15.84 14.65 12.48 13.28
1994 20.51 24.58 23.93 32.03
1995 29.46 28.26 28.11 31.46
1996 30.77 26.66 22.31 21.83
1997 18.68 20.88 19.88 18.78
</TABLE>

Year

Source: Metals Bulletin
NICKEL
AVG. QUARTERLY PRICE
1993-1997

<TABLE>
<CAPTION>
Measurement
Period
(Fiscal Year
Covered) 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
<S> <C> <C> <C> <C>
1993 2.72 2.61 2.16 2.14
1994 2.51 2.66 2.74 3.47
1995 3.97 3.44 3.96 3.79
1996 3.60 3.60 3.29 3.09
1997 3.53 3.44 3.16 2.93
</TABLE>

Year

Source: London Metal Exchange
COPPER
AVG. QUARTERLY PRICE
1993-1997

<TABLE>
<CAPTION>
Measurement
Period
(Fiscal Year
Covered) 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
<S> <C> <C> <C> <C>
1993 .98 .83 .83 .74
1994 .87 .98 1.13 1.28
1995 1.37 1.33 1.35 1.32
1996 1.17 1.15 .91 .99
1997 1.11 1.14 1.02 .86
</TABLE>

Year

Source: Commodity Exchange Inc.

RESEARCH AND DEVELOPMENT

The Company's research and new product development program is an integral
part of its business. Research and development focuses on adapting proprietary
technologies to develop new products and working with customers to meet their
specific requirements. New products include new chemical formulations,
concentrations of various components, product forms and packaging methods.
Research and development expenses were approximately $3.4 million, $3.8 million
and $6.7 million for 1995, 1996, and 1997, respectively. In connection with the
acquisition of Fidelity, annual research and development expenses are
anticipated to increase by approximately $3.0 million.

The Company's research staff of 83 persons conducts carboxylate, metal
salts and powders research and development at the Company's laboratories located
in Cleveland, Ohio; Newark, New Jersey; Research Triangle Park, North Carolina;
and Kokkola, Finland. The Company's Finnish facility also maintains a research
agreement with a subsidiary of Outokumpu Oy.

PATENTS AND TRADEMARKS

The Company holds 159 patents related to the manufacturing, processing and
use of metallo-organic and metal-based compounds. In addition, the Company has
the right to use, and in certain instances license and sell, technology covered
by 17 patents in the areas of hydrometallurgical processes, solvent extraction,
agitators and metal powders. The Company does not consider any single patent to
be material to its business as a whole.

MARKETING AND SALES

The Company conducts its North America marketing and sales from its offices
in Cleveland, Ohio and Research Triangle Park, North Carolina and its marketing
and sales in Europe and Asia Pacific through the

23
<PAGE> 24

Company's subsidiaries, OMG Europe GmbH and OMG Asia Pacific Co., Ltd. in
Dusseldorf, Germany and Taipei, Taiwan, respectively. The Company's sales group
consists of approximately 50 employees, who are responsible for certain industry
and geographic segments. The Company has approximately 110 independent sales and
marketing agents worldwide.

ENVIRONMENTAL MATTERS

Since 1970, a wide variety of environmental laws and regulations have been
adopted by the United States and foreign, state and local governments that
continue to be amended and supplemented. The Company is subject to these laws
and regulations as a result of its operations and its use of certain substances
that are, or have been, used, produced or discharged by the Company's plants. In
addition, soil and/or groundwater contamination presently exists and may in the
future be discovered at levels which require remediation under environmental
laws at properties now or previously owned, operated or used by the Company.

Annual environmental compliance costs were approximately $3.0 million in
1997. Such ongoing expenses include costs relating to waste water analysis and
disposal, hazardous and non-hazardous solid waste analysis and disposal, sea
water control, air emissions control, soil and groundwater clean-up and
monitoring and related staff costs. The Company anticipates that it will
continue to incur costs and make expenditures at moderately increasing levels
for the foreseeable future in light of the fact that environmental laws and
regulations are becoming increasingly stringent, including the likely lowering
of permissible discharge limits.

The Company also incurred capital expenditures of approximately $1.0
million in 1997 in connection with environmental compliance. The Company
anticipates that capital expenditure levels for such purposes will increase to
approximately $3.0 million in 1998, as it continues to modify on an ongoing,
regular basis, certain of its processes which may have an environmental impact.

Due to the ongoing development and understanding of facts and remedial
options and due to the possibility of unanticipated regulatory developments, the
amount and timing of future environmental expenditures could vary significantly
from those currently anticipated. Although it is difficult to quantify the
potential impact of compliance with or liability under environmental protection
laws, based on presently available information, the Company believes that the
ultimate aggregate cost to the Company of environmental remediation, as well as
other legal proceedings arising in the normal course of business, will not
result in a material adverse effect upon its financial condition or results of
operations.

EMPLOYEES

At March 31, 1998, the Company had 951 full-time employees of which 626
were located in North America, 218 in Finland, 39 in Asia Pacific, 38 in Western
Europe and 30 in Canada. Employees at the Company's facilities in Kokkola,
Finland are members of several national workers' unions under various union
agreements. Generally, such union agreements have two-year terms. Employees at
the Johnstown, Pennsylvania facility are members of the United Steelworkers
Union. The Johnstown union agreement has a term of 5 years expiring in June of
2003. Approximately 20 employees at the Belleville, Canada facility are members
of the Communications, Energy and Paper Workers Union of Canada, Local 599. The
most recent union agreement expired on April 30, 1998 and the new agreement is
currently under negotiation. The Company believes relations with its employees
are good.

PROPERTIES

The Company believes that its plants and facilities, which are of varying
ages and of different construction types, have been satisfactorily maintained,
are in good condition, are suitable for the Company's operations and currently
provide sufficient capacity to meet the Company's production requirements. The
land on which the Kokkola, Finland plant is located is leased with a remaining
term of 93 years. The land on which the St. George, Utah plant is located is
leased with a remaining term, including options, of 47 years. Otherwise, the
real properties comprising the Company's manufacturing facilities are owned by
the Company.

24
<PAGE> 25

The Company's Kokkola, Finland production facility ("KCO") is situated on
property owned by Outokumpu Zinc Oy. KCO and Outokumpu Zinc Oy share certain
physical facilities, services and utilities under agreements with varying
expiration dates. General property and administrative services are provided
under a service agreement, which expires in 1998, but are priced separately and
subject to yearly renegotiation in anticipation of phasing out Outokumpu Zinc
Oy's role as a service provider. Utilities and raw material purchase assistance
contracts provide that KCO jointly purchase with, or pay a fee to, affiliates of
Outokumpu Oy for assistance in negotiating contracts and securing bulk quantity
discounts.

Certain information regarding the Company's offices and research and
product development and manufacturing facilities is set forth below:

<TABLE>
<CAPTION>
APPROXIMATE LEASED/
LOCATION(A) FACILITY FUNCTION SQUARE FEET OWNED
- -------------------------- --------------------------------------------- ----------- -------
<S> <C> <C> <C>
Cleveland, Ohio........... Corporate headquarters 8,800 leased
Research and development facility 27,500 owned
Research and development facility 11,400 leased
Marketing and administration offices 10,000 owned
Dusseldorf, Germany....... Marketing and administration offices 3,800 leased
Taipei, Taiwan............ Marketing and administration office 1,500 leased
Franklin, Pennsylvania.... Manufactures carboxylates and salts 220,000 owned
St. George, Utah.......... Manufactures salts 37,000 owned
Kokkola, Finland.......... Manufactures carboxylates,
salts and powders 400,000 owned
Ezanville, France......... Manufactures carboxylates 50,000 owned
Johnstown, Pennsylvania... Manufactures powders 137,700 owned
Research Triangle Park,
North Carolina.......... Manufactures powders 83,525 owned
Marketing and administration offices 20,000 owned
Research and development facility 28,475 owned
Newark, New Jersey........ Manufactures salts 40,000 owned
Sarawak, Malaysia......... Manufactures salts 20,000 owned
Belleville, Canada........ Manufactures carboxylates 48,500 owned
</TABLE>

- ---------------

(a) Does not include facilities owned or leased by the Company's Asia Pacific
joint ventures.

LEGAL PROCEEDINGS

Manufacturers of specialty chemical products, including the Company, are
subject to various legal and administrative proceedings incidental to such
business. In the opinion of the Company, disposition of all suits and claims
should not in the aggregate have a material adverse effect on the Company's
business or financial position.

25
<PAGE> 26

MANAGEMENT

The following table sets forth, as of May 20, 1998, certain information
regarding the Company's directors and executive officers.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James P. Mooney........................... 50 Director, Chairman and Chief Executive Officer
Eugene Bak................................ 64 Director, President and Chief Operating Officer
Lee R. Brodeur............................ 69 Director
Frank Butler.............................. 62 Director
Thomas R. Miklich......................... 50 Director
John E. Mooney............................ 47 Director
Markku Toivanen........................... 57 Director
James M. Materna.......................... 53 Chief Financial Officer
Thomas E. Fleming......................... 52 Vice President and Chief Marketing Officer
</TABLE>

JAMES P. MOONEY is Chairman of the Board and has been a director and Chief
Executive Officer of the Company since 1991. From 1991 to 1994, Mr. Mooney was
President of the Company. From 1979 to 1991, Mr. Mooney was President and Chief
Executive Officer of Mooney Chemicals, Inc. Mr. Mooney received a B.A. degree in
history from Quincy University, where he is a member of the Board of Trustees.
Mr. Mooney retired as a director of Brush Wellman, Inc., a supplier of high
performance engineered materials, in 1997. Mr. Mooney is John E. Mooney's
brother.

EUGENE BAK has been President and Chief Operating Officer of the Company
since 1994. From 1992 to 1994, Mr. Bak was President of Mooney Chemicals, Inc.
From 1970 to 1992, Mr. Bak held various management positions at Mooney
Chemicals, Inc., including Vice President of Operations and Manager of the
Company's Franklin, Pennsylvania, facility. Mr. Bak received a B.S. in chemical
engineering from The Ohio State University and an M.B.A. from Seton Hall
University.

LEE R. BRODEUR has been a director of the Company since 1991 and a director
of Mooney Chemicals, Inc. since 1987. Mr. Brodeur was employed by the Firestone
Tire & Rubber Company, Akron, Ohio from 1951 until his retirement as Vice
Chairman of that company in 1986.

FRANK BUTLER was appointed as a director of the Company in 1996 to fill a
vacancy. From 1992 until his retirement in 1997, Mr. Butler was President and
General Manager of the Coatings Division of The Sherwin-Williams Company and
held several other management positions with The Sherwin-Williams Company since
1966. Mr. Butler received a B.S. degree in Chemistry from Kansas State
University and an M.S. degree in Chemistry from Iowa State University.

THOMAS R. MIKLICH has been a director of the Company since 1993. Mr.
Miklich has been employed by Invacare Corporation as Chief Financial Officer and
General Counsel since 1993. Prior to joining Invacare, Mr. Miklich was Executive
Vice President, Chief Financial Officer and a Director of Van Dorn Company. For
22 years prior to that, Mr. Miklich was employed by The Sherwin-Williams Company
where he held several financial positions, including that of Senior Vice
President and Chief Financial Officer.

JOHN E. MOONEY was appointed as a director of the Company in 1995 to fill a
vacancy. For the past 11 years, Mr. Mooney has been President of Sachem, Inc., a
specialty chemical manufacturer. Prior to that time, he was the Vice President
of Finance and Procurement for Mooney Chemicals, Inc. Mr. Mooney received a B.A.
in Economics from the University of Toronto. Mr. Mooney is James P. Mooney's
brother.

MARKKU TOIVANEN has been a director of the Company since 1991. Since 1993,
Mr. Toivanen has served as President and Chief Executive Officer of Outokumpu
Metals & Resources Oy. From 1992 to 1993, Mr. Toivanen served as OMR's Executive
Vice President and Chief Operating Officer. From 1991 to 1992, Mr. Toivanen
served as Chairman and Chief Executive Officer of Outokumpu Mines Ltd. (Canada),
a wholly owned subsidiary of Outokumpu Oy. Mr. Toivanen and Antti Aaltonen, Vice
President of Operations for Kokkola Chemicals Oy, are brothers-in-law.

26
<PAGE> 27

JAMES M. MATERNA has been the Company's Chief Financial Officer since 1992.
Prior to such time, he was a principal in Ashley Management, a financial
management services and private investment firm, for six years. From 1981 to
1986, Mr. Materna was a partner with the accounting firm of KPMG Peat Marwick in
New York and Cleveland. Mr. Materna received a B.S. degree in chemical
engineering from the University of Pittsburgh, and an M.B.A. degree from the
Graduate School of Business of Stanford University. Mr. Materna is a certified
public accountant.

THOMAS E. FLEMING was named Vice President and Chief Marketing Officer in
1997. Prior to such time, he was President of OMG Americas, Inc. for three
years. From 1987 to 1994, he served as Mooney Chemicals, Inc.'s Vice President
of Marketing, and from 1968 to 1987, Mr. Fleming held various positions with
Mooney Chemicals, Inc. including national accounts manager, industry manager and
national sales manager. Mr. Fleming received a B.B.A. degree in marketing from
Cleveland State University.

SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS

The following table sets forth, as of June 8, 1998, information concerning
the number of shares of Common Stock of the Company beneficially owned by each
director and executive officer named above individually and by all executive
officers and directors of the Company as a group. No executive officer or
director other than Mr. Mooney owns more than 1% of the outstanding shares of
Common Stock of the Company. Mr. Mooney owns 4.4% and all executive officers and
directors as a group own approximately 7.6% of such shares. The totals shown
below for each person and for the group include shares held personally, shares
held by family members, shares held under the Profit-Sharing Plan, and shares
acquirable within sixty days of the above date by the exercise of stock options
granted under the Company's stock option plan.

AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP (1)

<TABLE>
<CAPTION>
NAME OF DIRECTLY PROFIT-SHARING EXERCISABLE
BENEFICIAL OWNER OWNED(2) PLAN(3) OPTIONS(4) TOTAL
---------------- -------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
Eugene Bak............................. 3,450 15,301 86,699 105,450
Lee R. Brodeur......................... 5,750 0 10,885 16,635
Frank E. Butler........................ 200 0 4,275 4,475
Thomas E. Fleming...................... 1,382 6,048 80,441 87,871
James M. Materna....................... 1,050 1,903 93,149 96,102
Thomas R. Miklich...................... 16,500 0 9,933 26,433
James P. Mooney(5)..................... 503,716 41,335 402,225 947,276
John E. Mooney......................... 9,636 0 3,186 12,822
Markku Toivanen........................ 0 0 13,387 13,387
All Directors and Officers as a Group
(consisting of 16 persons)........... 546,634 91,315 1,010,996 1,648,945
</TABLE>

- ---------------

(1) Each person has sole voting and investment power with respect to all shares
shown except as indicated below.

(2) Includes shares owned by or jointly with family members.

(3) The persons indicated have limited investment power with respect to the
shares held in the Profit-Sharing Plan.

(4) Represents shares subject to stock options that are exercisable currently or
within 60 days of April 30, 1998.

(5) During May and June 1998, Mr. James P. Mooney sold 110,000 shares of Common
Stock directly owned by him.

27
<PAGE> 28

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below have severally agreed to purchase from the Company, and
the Company has agreed to sell to them, the following respective number of
shares of Common Stock at the offering price less the underwriting discounts and
commissions set forth on the cover of this Prospectus.

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation......... 639,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................... 639,000
First Analysis Securities Corporation....................... 142,000
McDonald & Company Securities, Inc.......................... 60,000
Bear, Stearns & Co. Inc..................................... 60,000
Lehman Brothers Inc......................................... 60,000
Morgan Stanley & Co. Incorporated........................... 60,000
Smith Barney Inc............................................ 60,000
First Montauk Securities Corporation........................ 30,000
---------
Total.................................................. 1,750,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to approval of certain legal matters by their counsel
and to certain other conditions. The Underwriters are obligated to take and pay
for all the shares of Common Stock offered hereby (other than those covered by
the over-allotment option described below) if any of such shares of Common Stock
are taken.

The Company has been advised by the Underwriters that they propose to offer
the shares of Common Stock to the public at the offering price set forth on the
cover of this Prospectus and to certain dealers at such price, less a concession
not in excess of $1.20 per share. The Underwriters may allow, and such dealers
may re-allow, a concession not in excess of $0.10 per share to certain other
dealers. After the initial offering, the offering price and other selling terms
may be changed by the Underwriters. The Company has granted to the Underwriters
an option, exercisable not later than 30 calendar days from the date of this
Prospectus, to purchase up to 262,500 additional shares of Common Stock at the
same price per share as the Company receives for the other shares that the
Underwriters have agreed to purchase.

To the extent that the Underwriters exercise such option to purchase up to
a total of 262,500 shares of Common Stock, each of the Underwriters will have a
firm commitment to purchase approximately the same percentage thereof that the
number of shares of Common Stock to be purchased by it shown in the above table
bears to the total number of shares of Common Stock shown in the above table,
and the Company will be obligated, pursuant to the option, to sell such Common
Stock to the Underwriters. The Underwriters may exercise such option only to
cover over-allotments made in connection with the sale of the Common Stock
offered hereby.

The Underwriting Agreement contains covenants of indemnity among the
Underwriters and the Company against certain civil liabilities, including
liabilities under the Securities Act.

The Company has agreed that it will not, and shall cause each director and
executive officer of the Company to agree that such person will not, without the
prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation,
(x) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, file any registration statement with respect to (in the
case of the Company) or make any demand for or exercise any right with respect
to the registration of (in the case of each director and executive officer) or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock, or (y) enter into any swap or other arrangement that transfers all
or a portion of the economic consequences associated with the ownership of the
Common Stock (regardless of whether any of the transactions described in clause
(x) or

28
<PAGE> 29

(y) of this paragraph is to be settled by the delivery of Common Stock, or such
other securities, in cash or otherwise), for a period of 90 days after the date
of the Underwriting Agreement, other than (i) the shares of Common Stock offered
hereby, and (ii) the Company may issue any shares of Common Stock sold upon the
exercise of an option or warrant or the conversion of a security outstanding on
the date hereof or pursuant to any employee stock option or other benefit plan
in existence on the date hereof, or pursuant to the Company's Long-Term
Incentive Compensation Plan.

Due to the repayment of borrowings under the revolving credit facility,
certain affiliates of members of the National Association of Securities Dealers,
Inc. participating in the distribution will receive more than 10% of the net
proceeds of the Offering.

Certain of the Underwriters have provided from time to time, and are
expected to provide in the future, investment banking services to the Company
and certain of their affiliates for which such Underwriters have received and
will receive customary fees and commissions.

In connection with the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may over-allot the Offering,
creating a syndicate short position. The Underwriters may bid for and purchase
shares of Common Stock in the open market to cover syndicate short positions. In
addition, the Underwriters may bid for and purchase shares of Common Stock in
the open market to stabilize the price of the Common Stock. These activities may
stabilize or maintain the market price of the Common Stock above independent
market levels. The Underwriters are not required to engage in these activities,
and may end any of these activities at any time.

LEGAL MATTERS

Certain legal matters in connection with the Common Stock offered hereby
are being passed upon for the Company by Squire, Sanders & Dempsey L.L.P. and
for the Underwriters by Davis Polk & Wardwell.

EXPERTS

The consolidated financial statements of OM Group, Inc. at December 31,
1997 and 1996, and for each of the three years in the period ended December 31,
1997, appearing in this Prospectus and Registration Statement in which this
Prospectus is included, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein and in
the Registration Statement. Such financial statements have been included herein
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.

With respect to the unaudited condensed consolidated interim financial
information for the three-month periods ended March 31, 1998 and March 31, 1997,
incorporated by reference in this Prospectus, Ernst & Young LLP have reported
that they have applied limited procedures in accordance with professional
standards for a review of such information. However, their separate report,
included in OM Group, Inc.'s Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, and incorporated herein by reference, states that they did not
audit and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their report on such information should
be restricted considering the limited nature of the review procedures applied.
Pursuant to Rule 436(c) of the Securities Act of 1933 such report is not a part
of the registration statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.

29
<PAGE> 30

[This Page Intentionally Left Blank]
<PAGE> 31

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets as of December 31, 1996 and
1997, and as of March 31, 1998 (unaudited)................ F-3
Statements of Consolidated Income for each of the three
years in the period ended December 31, 1997, and for the
three months ended March 31, 1997 and 1998 (unaudited).... F-4
Statements of Consolidated Stockholders' Equity for each of
the three years in the period ended December 31, 1997..... F-5
Statements of Consolidated Cash Flows for each of the three
years in the period ended December 31, 1997, and for the
three months ended March 31, 1997 and 1998 (unaudited).... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>

F-1
<PAGE> 32

REPORT OF INDEPENDENT AUDITORS

BOARD OF DIRECTORS AND STOCKHOLDERS
OM GROUP, INC.

We have audited the accompanying consolidated balance sheets of OM Group,
Inc. as of December 31, 1997 and 1996, and the related statements of
consolidated income, stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of OM Group, Inc.
at December 31, 1997 and 1996, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Cleveland, Ohio
February 3, 1998

F-2
<PAGE> 33

OM GROUP, INC.
CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------- ---------------
1996 1997 1998
-------- -------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 7,818 $ 13,193 $ 8,100
Accounts receivable, less allowance of $210 in 1996,
$680 in 1997, and $929 in 1998.................... 60,054 80,602 92,122
Inventories.......................................... 195,050 219,201 223,598
Other current assets................................. 12,448 11,753 15,387
-------- -------- --------
Total current assets......................... 275,370 324,749 339,207
Property, plant and equipment:
Land................................................. 467 2,867 3,936
Buildings and improvements........................... 40,569 49,939 52,079
Machinery and equipment.............................. 122,695 162,938 183,656
Furniture and fixtures............................... 4,074 8,615 9,792
-------- -------- --------
167,805 224,359 249,463
Less accumulated depreciation........................ 57,184 74,112 78,816
-------- -------- --------
110,621 150,247 170,647
Other assets:
Unprocessed inventory................................ 27,499
Goodwill and other intangible assets, less
accumulated amortization of $4,967 in 1996, $8,296
in 1997, and $9,614 in 1998....................... 23,036 116,751 177,223
Other assets......................................... 6,930 9,316 14,279
-------- -------- --------
Total assets................................. $443,456 $601,063 $701,356
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.................... $ 3,586 $ 219 $ 184
Accounts payable..................................... 77,330 67,521 51,324
Accrued income taxes................................. 2,753 9,532 4,104
Deferred income taxes................................ 7,038 8,628 8,491
Other accrued expenses............................... 10,802 14,782 14,548
-------- -------- --------
Total current liabilities.................... 101,509 100,682 78,651
Long-term debt......................................... 109,295 170,334 284,380
Contract payable....................................... 27,499
Deferred income taxes.................................. 18,393 20,555 20,869
Other long-term liabilities............................ 1,438 8,251 7,690
Stockholders' equity:
Preferred stock, $.01 par value:
Authorized 2,000,000 shares; no shares issued or
outstanding
Common stock, $.01 par value:
Authorized 30,000,000 shares; issued 18,759,346
shares in 1996, 22,209,346 shares in 1997 and
1998.............................................. 188 222 222
Capital in excess of par value....................... 102,125 189,281 189,281
Retained earnings.................................... 85,871 117,465 126,235
Treasury stock (141,432 shares in 1996, 142,720
shares in 1997, and 145,219 in 1998, at cost)..... (2,621) (4,829) (5,234)
Foreign currency translation adjustments............. (241) (898) (738)
-------- -------- --------
Total stockholders' equity................... 185,322 301,241 309,766
-------- -------- --------
Total liabilities and stockholders' equity... $443,456 $601,063 $701,356
======== ======== ========
</TABLE>

See accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE> 34

OM GROUP, INC.
STATEMENTS OF CONSOLIDATED INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

See accompanying Notes to Consolidated Financial Statements.

F-4
<PAGE> 35

OM GROUP, INC.
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOREIGN
CAPITAL IN CURRENCY
COMMON EXCESS OF RETAINED TREASURY TRANSLATION
STOCK PAR VALUE EARNINGS STOCK ADJUSTMENTS TOTAL
------ ---------- -------- -------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995...... $125 $102,088 $ 40,304 $(1,158) $(184) $141,175
Net income...................... 25,933 25,933
Translation adjustment.......... 148 148
Dividends paid.................. (4,474) (4,474)
Treasury stock purchased........ (1,589) (1,589)
Issuance of shares under benefit
plans, including tax
benefit....................... (393) 628 235
---- -------- -------- ------- ----- --------
Balance at December 31, 1995.... 125 102,088 61,370 (2,119) (36) 161,428
Net income...................... 30,047 30,047
Non-employee directors'
compensation.................. 100 100
Translation adjustment.......... (205) (205)
Dividends paid.................. (5,465) (5,465)
Treasury stock purchased........ (742) (742)
Issuance of shares under benefit
plans, including tax
benefit....................... (81) 240 159
Three-for-two stock split....... 63 (63)
---- -------- -------- ------- ----- --------
Balance at December 31, 1996.... 188 102,125 85,871 (2,621) (241) 185,322
Net income...................... 38,443 38,443
Non-employee directors'
compensation.................. 198 198
Translation adjustment.......... (657) (657)
Dividends paid.................. (6,792) (6,792)
Treasury stock purchased........ (4,173) (4,173)
Issuance of shares under benefit
plans, including tax
benefit....................... (57) 1,965 1,908
Sale of common stock............ 34 86,958 86,992
---- -------- -------- ------- ----- --------
Balance at December 31, 1997.... $222 $189,281 $117,465 $(4,829) $(898) $301,241
==== ======== ======== ======= ===== ========
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

F-5
<PAGE> 36

OM GROUP, INC.
STATEMENTS OF CONSOLIDATED CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------- --------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities
Net income........................ $ 25,933 $ 30,047 $ 38,443 $ 8,216 $ 11,169
Items not affecting cash:
Depreciation and
amortization................. 13,734 15,814 21,225 5,001 6,517
Foreign exchange loss (gain)... 333 (223) (715) (285) (178)
Deferred income taxes.......... 1,552 7,841 5,108 46 (1,226)
Changes in operating assets and
liabilities:
Accounts receivable............ (25,336) 11,905 (9,435) (5,245) (5,841)
Inventories.................... (14,081) (83,482) 15,520 (968) 7,073
Accounts payable and other
accruals..................... 7,342 34,765 (40,837) (22,190) (21,443)
Other.......................... (5,833) (851) 251 291 (2,010)
-------- -------- -------- -------- --------
Net cash provided by (used in)
operating activities.............. 3,644 15,816 29,560 (15,134) (5,939)
Investing activities
Expenditures for property, plant
and equipment, net............. (31,215) (28,129) (34,399) (7,875) (16,385)
Acquisitions of businesses........ (14,511) (395) (123,718) (123,745) (94,043)
-------- -------- -------- -------- --------
Net cash used in investing
activities........................ (45,726) (28,524) (158,117) (131,620) (110,428)
Financing activities
Dividend payments................. (4,474) (5,465) (6,792) (1,501) (1,986)
Long-term borrowings.............. 94,418 33,364 172,315 150,047 114,000
Payments of long-term debt........ (46,021) (15,591) (114,643) (1,400) (66)
Purchase of treasury stock........ (1,589) (742) (4,173) (950)
Proceeds from exercise of stock
options........................ 235 159 708 64 111
Sale of common stock.............. 86,992
-------- -------- -------- -------- --------
Net cash provided by financing
activities........................ 42,569 11,725 134,407 147,210 111,109
Effect of exchange rate changes on
cash.............................. 19 (297) (475) (97) 165
-------- -------- -------- -------- --------
Increase (decrease) in cash......... 506 (1,280) 5,375 359 (5,093)
Cash and cash equivalents at
beginning of period............... 8,592 9,098 7,818 7,818 13,193
-------- -------- -------- -------- --------
Cash and cash equivalents at end of
period............................ $ 9,098 $ 7,818 $ 13,193 $ 8,177 $ 8,100
======== ======== ======== ======== ========
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

F-6
<PAGE> 37

OM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1995, 1996 AND 1997

(Thousands of dollars, except per share amounts)

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of OM Group,
Inc. (the Company) and its majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Investments in joint ventures are accounted for under the equity method.

Inventories

Inventories are principally stated at the lower of cost or market and
valued using the last-in, first-out (LIFO) method.

Property, Plant and Equipment

Property, plant and equipment is recorded at historical cost less
accumulated depreciation. Depreciation of plant and equipment is provided by the
straight-line method over the useful lives, ranging from three to forty years,
based on the various classes of assets. Long-lived assets are assessed for
impairment when operating profits for the related business indicate that the
carrying value may not be recoverable.

Research and Development

Selling, general and administrative expenses include research and
development costs of $3,413, $3,756 and $6,687 in 1995, 1996 and 1997,
respectively, which are expensed as incurred.

Income Taxes

Deferred income taxes are provided to recognize the effect of temporary
differences between financial and tax reporting arising principally from
different depreciation methods and inventory reserves. Deferred income taxes are
not provided for undistributed earnings of foreign consolidated subsidiaries, to
the extent such earnings are reinvested for an indefinite period of time.

Foreign Currency Translation

The functional currency for the Company's Finnish subsidiary is the U.S.
dollar since a majority of its purchases and sales are denominated in U.S.
dollars and it holds a significant intercompany note payable, denominated in
U.S. dollars. Accordingly, foreign exchange gains and losses related to assets,
liabilities and transactions which are denominated in other currencies
(principally the Finnish Markka) are included in results of operations. The
Company enters into forward contracts to partially hedge its balance sheet
exposure to the Finnish Markka, and accordingly, gains or losses related to the
forward contracts are included in results of operations.

The functional currency for the Company's other subsidiaries outside of the
United States is the applicable local currency. For those operations, financial
statements are translated into U.S. dollars at year-end exchange rates as to
assets and liabilities and weighted average exchange rates as to revenues and
expenses. The resulting translation adjustments are recorded as a component of
stockholders' equity.

Goodwill and Other Intangibles

Goodwill represents principally the excess of the purchase price of
businesses acquired over the fair market value of the net tangible assets
acquired. Other intangibles represent principally patents, trademarks and

F-7
<PAGE> 38
OM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

technology acquired. Goodwill and other intangible assets are being amortized on
a straight-line basis over their respective useful lives (fifteen to forty
years). Goodwill is assessed for impairment when operating profits for the
related business indicate that the carrying value may not be recoverable.

Cash Equivalents

For purposes of the statements of consolidated cash flows, all highly
liquid investments with a maturity of three months or less when purchased are
considered to be cash equivalents.

Earnings Per Share

The Company adopted Statement of Financial Accounting Standards (SFAS) No.
128 in December 1997. Basic earnings per share are computed based on the
weighted average number of shares outstanding. Diluted earnings per share are
computed based on the weighted average number of shares outstanding and the
dilutive effect of stock options outstanding as discussed in Note H. All prior
period earnings per share amounts have been restated to reflect the adoption of
this statement.

Stock Options and Compensation Plans

The Company grants stock options for a fixed number of shares to certain
employees with an exercise price equal to the fair value of the shares at the
date of grant and accounts for stock options using the intrinsic value method.
Accordingly, compensation expense is not recognized for the stock option grants.

Non-employee members of the Board of Directors are eligible to receive
their annual retainer in the form of cash, stock options, or restricted stock.
If stock options are elected, the exercise price is 75% of the fair market value
and directors' cash compensation is utilized to acquire the options. Also,
directors electing to receive restricted stock receive additional restricted
stock equal to 5% of their applied cash compensation. Accordingly, compensation
expense is recognized for stock option and restricted share grants elected by
eligible directors.

Revenue Recognition

Revenues are recognized when products are shipped to unaffiliated
customers.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions in certain circumstances that affect the amounts reported in the
accompanying consolidated financial statements and notes. Actual results could
differ from these estimates.

Financial Presentation Changes

Certain amounts for prior years have been reclassified to conform to the
current year presentation.

Recently Issued Accounting Pronouncements

In June, 1997, SFAS No. 130, "Reporting Comprehensive Income", was issued.
SFAS No. 130 establishes new standards for reporting comprehensive income and
its components; however the adoption of SFAS No. 130 has no impact on net income
or stockholders' equity. The Company adopted SFAS No. 130 in the first quarter
of 1998. The Company's comprehensive income includes net income and foreign
currency translation adjustments, and was $26,081, $29,842 and $37,786 for the
years ended December 31, 1995, 1996 and 1997, respectively. These amounts do not
differ materially from net income.

In June, 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information", was issued. SFAS No. 131 changes the standards for
reporting financial results by operating segments and related
F-8
<PAGE> 39
OM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

products and services, geographic areas, and major customers. The Company must
adopt SFAS No. 131 no later than year-end 1998; adoption of this statement is
not expected to have a material impact on the Company.

Interim Financial Information

The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair financial presentation have been
included. Past operating results are not necessarily indicative of the results
that may occur in future periods.

B. INVENTORIES

Current inventories consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------- ---------
1996 1997 1998
(UNAUDITED)
<S> <C> <C> <C>
Raw materials and supplies........................ $116,389 $110,477 $109,019
Finished goods.................................... 87,980 107,989 112,000
-------- -------- --------
204,369 218,466 221,019
LIFO reserve...................................... (9,319) 735 2,579
-------- -------- --------
Total inventories................................. $195,050 $219,201 $223,598
======== ======== ========
</TABLE>

Unprocessed inventory at December 31, 1996 represented cobalt slag
feedstock quantities in excess of a twelve-month supply. The cost of the cobalt
obtained is based upon prevailing market prices.

C. ACQUISITION, SALE OF COMMON STOCK, AND SUPPLEMENTAL EARNINGS PER SHARE

On January 21, 1997, the Company acquired SCM Metal Products, Inc. (SCM), a
subsidiary of U.S. Industries, Inc. SCM, which had fiscal 1996 sales of
approximately $94 million, is one of the world's leading producers of
metal-based specialty powders and chemicals, principally specialty powders
primarily from copper, iron and stainless steel. The total consideration paid by
the Company for SCM was $122 million, plus expenses, and was recorded using the
purchase method of accounting. Accordingly, the Company's results of operations
include the impact of SCM from the date of acquisition. The acquisition was
financed through bank borrowings.

In April, 1997, the Company sold 3,450,000 shares of common stock in a
public offering. The net proceeds of $87.0 million were used to pay down a
portion of the debt incurred in acquiring SCM. Had these shares been issued at
the date of acquisition, net income per common share for the year ended December
31, 1997 would have been $1.81 per share.

Pro forma net sales, net income and net income per share as if the
acquisition had occurred as of January 1, 1997, would not be materially
different from that reported in the Statements of Consolidated Income for the
twelve months ended December 31, 1997. Had the acquisition occurred as of
January 1, 1996, pro forma net sales, net income and net income per share for
the year ended December 31, 1996 would have been as follows:

<TABLE>
<S> <C>
Net sales................................................... $482,278
Net income.................................................. $ 29,187
Net income per common share................................. $ 1.57
Net income per common share -- assuming dilution $ 1.51
</TABLE>

F-9
<PAGE> 40
OM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The aforementioned pro forma information includes the amortization of
goodwill associated with the acquisition over 40 years by the straight-line
method and an interest cost on the funds borrowed to finance the acquisition.

D. FINANCIAL INSTRUMENTS

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
<S> <C> <C>
Notes payable to banks...................................... $ 79,000 $110,000
Notes payable to insurance companies........................ 30,000 60,000
Business acquisition debt................................... 3,447
Other....................................................... 434 553
-------- --------
112,881 170,553
Less: Current portion....................................... 3,586 219
-------- --------
Total long-term debt........................................ $109,295 $170,334
======== ========
</TABLE>

At December 31, 1997, the Company had a $180 million revolving credit
facility with a group of banks, with variable interest rates based upon either
the agent bank's rate or LIBOR plus a .35% to .75% margin, at the Company's
option. In connection with the acquisitions of Auric Corporation and Dussek
Campbell Limited (see Note K), the Company's revolving credit facility was
further expanded to $250 million in January, 1998, including $10 million for the
issuance of letters of credit. The five year agreement, expiring in January,
2003, has variable interest rates based upon either the agent bank's rate or
LIBOR plus a .40% to .80% margin. Under this credit agreement, the Company must
meet certain funded debt ratios, and there are also covenants which restrict the
dividend paying and borrowing capability of the Company. Annual dividends are
limited to $12 million or 25% of consolidated net income, whichever is greater.

During the three year period ended December 20, 1997, the Company had an
interest rate swap agreement to convert the variable interest rates on an
aggregate contract amount of $30 million to a fixed rate of 7.28% plus .35% to
.75%. Subsequent to December 31, 1997, the Company entered into several interest
rate swap agreements to convert the variable interest rates on an aggregate
contract amount of $60 million to an average fixed rate of 5.65% plus .40% to
.80% for a three year period ending February 9, 2001. The combined effective
rate of the Company's bank borrowings and the related swap agreement is 6.57%.
The net interest paid or received on interest rate swaps is included in interest
expense. The counterparties to the interest rate swaps are international
commercial banks.

During 1995 the Company borrowed $30 million from a group of insurance
companies through a private placement. The borrowings bear interest at 7.38% and
are due August 30, 2005. During 1997, in order to convert to a fixed rate and
extend the term on a portion of its borrowings, the Company borrowed an
additional $30 million in a private placement with a group of insurance
companies and used the proceeds to reduce borrowings under its revolving credit
facility with its banks. Borrowings amounting to $15 million bear interest at
6.82% and are due October 24, 2007. The balance of the borrowings bear interest
at 6.99% and are due October 24, 2009. Under the terms of these note purchase
agreements, the Company must meet certain interest coverage and funded debt
ratios. There are also covenants which restrict the dividend paying and
borrowing capability of the Company.

Aggregate annual maturities of long-term debt for the five years following
December 31, 1997 are as follows: 1998 -- $219; 1999 -- $139; 2000 -- $20;
2001 -- $20 and 2002 -- $20. Interest paid was $4,454, $7,056 and $14,771 for
the years ended December 31, 1995, 1996 and 1997, respectively. At December 31,
1997 the carrying value of the Company's debt approximated its fair value.

F-10
<PAGE> 41
OM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company enters into forward contracts to purchase Finnish Markka to
partially hedge its balance sheet exposure to rate fluctuations between the
Finnish Markka and the U.S. dollar. At December 31, 1997, the notional value of
these forward contracts approximated $7,600. The fair value of the forward
contracts, based on the current settlement price at December 31, 1997,
approximated $300 payable, which was recorded in results of operations.

E. INCOME TAXES

Income before income taxes consists of the following:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1996 1997
<S> <C> <C> <C>
United States........................................ $ 4,654 $ 1,384 $ 7,794
Outside the United States............................ 33,864 43,019 50,183
------- ------- -------
$38,518 $44,403 $57,977
======= ======= =======
</TABLE>

Income taxes are summarized as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1996 1997
<S> <C> <C> <C>
Current:
United States:
Federal......................................... $ 2,158 $ 923 $ 1,267
State and local................................. 85 258 1,166
Outside the United States....................... 8,790 5,334 11,993
------- ------- -------
11,033 6,515 14,426

Deferred:
United States...................................... 949 644 1,209
Outside the United States.......................... 603 7,197 3,899
------- ------- -------
1,552 7,841 5,108
------- ------- -------
$12,585 $14,356 $19,534
======= ======= =======
</TABLE>

Significant components of the Company's deferred income taxes are as
follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
<S> <C> <C>
Current asset -- operating accruals......................... $ 4,203 $ 3,372
Current liability -- inventories............................ (7,038) (8,628)
Long-term asset -- employee benefits........................ 620 2,580
Long-term liability -- accelerated depreciation............. (18,393) (20,555)
-------- --------
$(20,608) $(23,231)
======== ========
</TABLE>

F-11
<PAGE> 42
OM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A reconciliation of income taxes computed at the United States statutory
rate to the effective income tax rate follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996 1997
<S> <C> <C> <C>
Income taxes at the United States statutory rate............ 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit.............. .1 .4 1.3
Effective tax rate differential of earnings outside of the
United States............................................. (7.2) (5.7) (2.7)
Change in statutory tax rate outside of the United States... 1.8
Adjustment of worldwide tax liabilities..................... 2.9 2.2 (2.0)
Non-deductible goodwill..................................... .5 .4 1.6
Other -- net................................................ (.4) .5
---- ---- ----
32.7% 32.3% 33.7%
==== ==== ====
</TABLE>

The Company has not provided additional United States income taxes on
approximately $114 million of undistributed earnings of consolidated foreign
subsidiaries included in stockholders' equity. Such earnings could become
taxable upon the sale or liquidation of these foreign subsidiaries or upon
dividend repatriation. The Company's intent is for such earnings to be
reinvested by the subsidiaries or to be repatriated only when it would be tax
effective through the utilization of foreign tax credits. It is not practicable
to estimate the amount of unrecognized withholding taxes and deferred tax
liability on such earnings.

Income tax payments were $5,060, $14,129 and $12,551 during the years ended
December 31, 1995, 1996 and 1997, respectively.

F. RETIREMENT PLANS

The Company sponsors several defined contribution plans covering certain
employees. Company contributions are determined by the Board of Directors based
upon participant compensation. The Company also sponsors a non-contributory,
non-qualified supplemental executive retirement plan for certain employees,
providing benefits beyond those covered in the defined contribution plans.
Beginning in 1997, in connection with the acquisition of SCM, the Company
maintains a 401(k) plan for certain non-union employees in the United States.
Aggregate defined contribution plan expenses were $1,388, $1,727 and $2,295 in
1995, 1996 and 1997, respectively.

In connection with the acquisition of SCM, the Company also has several
non-contributory defined benefit retirement plans covering certain United States
hourly and salaried employees, in order to provide uniform retirement income.
The benefits for these plans are based primarily on years of credited service
and average compensation as defined under the respective plan provisions. The
Company's funding policy is to contribute annually an amount sufficient to meet
the minimum funding requirements set forth in the Employee Retirement Income
Security Act of 1974.

The net periodic pension cost for the year ended December 31, 1997,
includes the following components:

<TABLE>
<S> <C>
Service cost -- benefits earned during the period........... $ 513
Interest cost on projected benefit obligations.............. 1,056
Actual return on plan assets................................ (1,071)
-------
Net pension cost.................................. $ 498
=======
</TABLE>

F-12
<PAGE> 43
OM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table sets forth the funded status of the Company's pension
plans and the amounts reflected in the accompanying balance sheet at December
31, 1997:

<TABLE>
<S> <C>
Actuarial present value of benefit obligation:
Vested employees.......................................... $(10,942)
Non-vested employees...................................... (1,018)
--------
Accumulated benefit obligation............................ (11,960)
Additional amount related to projected salary increases... (2,408)
--------
Total projected benefit obligation........................ (14,368)
Funded assets at fair value............................... 11,737
--------
Accrued pension liability................................. $ (2,631)
========
</TABLE>

Plan assets consist primarily of equity securities and domestic
governmental and corporate obligations.

The following assumptions were used to determine the projected benefit
obligation and plan assets:

<TABLE>
<S> <C>
Assumed discount rate....................................... 7.50%
Assumed rate of compensation increase....................... 4.50%
Expected rate of return on plan assets...................... 9.00%
</TABLE>

G. RETIREMENT BENEFITS OTHER THAN PENSIONS

The Company provides health care benefits upon retirement for certain
United States employees with a specified number of years of service. The
estimated cost of their benefits is actuarially determined and accrued over the
employees' service periods as a level percentage of compensation for employees
expected to qualify for benefits.

The components of expense for postretirement benefits are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996 1997
<S> <C> <C> <C>
Service cost -- benefits earned during this period.......... $16 $ 27 $202
Interest cost on the accumulated obligation................. 75 84 332
--- ---- ----
Postretirement benefit cost....................... $91 $111 $534
=== ==== ====
</TABLE>

The liability for postretirement benefit plans other than pensions at
December 31 follows:

<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees.................................................. $(506) $(1,312)
Employees eligible to retire.............................. (253) (1,199)
Other active employees.................................... (268) (3,530)
Unrecognized
Prior service cost........................................ 1,468
Net (gain)/loss........................................... 200 (44)
----- -------
Postretirement benefit obligation................. $(827) $(4,617)
===== =======
</TABLE>

The increase in annual expense during 1997 and the related accrual at
December 31, 1997 reflects the impact of the acquisition of SCM.

F-13
<PAGE> 44
OM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Actuarial assumptions used in the calculation of the liability for
postretirement benefits other than pensions are as follows:

<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
Discount rate............................................... 7.75% 7.75% 7.50%
Projected health care cost trend rate....................... 10.20% 9.55% 9.50%
Ultimate trend rate......................................... 5.90% 5.90% 5.50%
Year ultimate trend rate is achieved........................ 2006 2006 2006
</TABLE>

An increase of 1% in assumed health care cost trend rates would increase
the accumulated benefit obligation as of December 31, 1997 by $1,447 and the
aggregate annual service and interest cost by $109.

H. STOCKHOLDERS' EQUITY

In November, 1996, the Board of Directors declared a dividend distribution
of one Right for each outstanding share of common stock. Each Right entitles the
shareholder to purchase one one-hundredth share of Series A Participating
Preferred Stock at a purchase price of $160 per share, subject to adjustment.
The Rights become exercisable if certain events occurred relating to a person or
group (Acquiring Person) acquiring or attempting to acquire 15% or more of the
outstanding shares of common stock. In the event that the Rights become
exercisable, each Right (except for Rights beneficially owned by the Acquiring
Person, which become null and void) would entitle the holder to purchase for the
exercise price then in effect, shares of the Company's common stock having a
value of twice the exercise price. The Rights may be redeemed by the Board of
Directors in whole, but not in part, at a price of $0.01 per Right. The Rights
have no voting or dividend privileges and are attached to, and do not trade
separately from the common stock. The Rights expire on November 14, 2006.

The following table sets forth the computation of net income per common
share and net income per common share -- assuming dilution:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------- ---------------------------
1995 1996 1997 1997 1998
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net income.................... $25,933 $30,047 $38,443 $ 8,216 $11,169
Weighted average number of
shares outstanding.......... 18,637 18,624 20,929 18,627 22,064
Dilutive effect of stock
options..................... 500 642 725 700 756
------- ------- ------- ------- -------
Weighted average number of
shares
outstanding -- assuming
dilution.................... 19,137 19,266 21,654 19,327 22,820
======= ======= ======= ======= =======
Net income per common share... $ 1.39 $ 1.61 $ 1.84 $ .44 $ .51
Net income per common share --
assuming dilution........... $ 1.36 $ 1.56 $ 1.78 $ .43 $ .49
</TABLE>

The Company's Long-Term Incentive Compensation Plan has authorized the
grant of options to management personnel for up to 1,523,438 shares of the
Company's common stock. All options granted have 10 year terms and vest and
become fully exercisable at the end of the next fiscal year following the year
of grant.

Pro forma information regarding net income and earnings per share is
required by FASB Statement No. 123, "Accounting for Stock Based Compensation",
and has been determined as if the Company had accounted for its employee stock
options under the fair value method of that Statement. The fair value of these
options was

F-14
<PAGE> 45
OM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

estimated at the date of grant using the Black-Scholes options pricing model
with the following weighted-average assumptions:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1996 1997
<S> <C> <C> <C>
Risk-free interest rate................................... 6.5% 6.5% 6.0%
Dividend yield............................................ 1.2% 1.2% 1.2%
Volatility factor of Company common stock................. .20 .20 .19
Weighted-average expected option life (years)............. 5 5 5
</TABLE>

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:

<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
Net income........................................... $25,782 $28,874 $36,764
Net income per common share.......................... $ 1.38 $ 1.55 $ 1.76
Net income per common share -- assuming dilution..... $ 1.35 $ 1.50 $ 1.70
</TABLE>

A summary of the Company's stock option activity and related information
follows:

<TABLE>
<CAPTION>
1995 1996 1997
-------------------- -------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1.......... 900,101 $ 7.65 1,061,656 $ 9.94 1,243,079 $12.55
Granted......................... 208,055 18.72 202,860 25.96 239,603 39.94
Exercised....................... (46,500) 5.04 (17,355) 9.19 (114,909) 6.15
Forfeited....................... (4,082) 12.25
--------- ------ --------- ------ --------- ------
Outstanding at December 31........ 1,061,656 $ 9.94 1,243,079 $12.55 1,367,773 $17.89
Exercisable at end of year........ 878,168 1,055,579 1,138,773
Weighted-average fair value of
options granted during the
year............................ $ 5.46 $ 7.37 $10.28
</TABLE>

The weighted-average remaining contractual life of these options
outstanding is 7.0 years.

The following table summarizes information about stock options outstanding
and exercisable at December 31, 1997:

<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
---------------------------------- --------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
of Shares Life Price of Shares Price
<S> <C> <C> <C> <C> <C>
Range of exercise prices:
$ 5.04 - $13.00.............................. 748,824 5.4 $ 8.20 748,824 $ 8.20
$17.31 - $39.94.............................. 618,949 9.1 $29.61 389,949 $23.54
</TABLE>

I. COMMITMENTS AND CONTINGENCIES

In June, 1997, the Company signed contracts as a partner to build a smelter
in Lubumbashi, Democratic Republic of Congo. The Company's approximately $40
million share of the $80 million project will be funded over the two year
construction period through cash generated by operations and the Company's
credit facilities.

F-15
<PAGE> 46
OM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company is a party to various legal proceedings incidental to its
business and is subject to a variety of environmental and pollution control laws
and regulations in the jurisdictions in which it operates. As is the case with
other companies in similar industries, the Company faces exposure from actual or
potential claims and legal proceedings involving environmental matters. Although
it is difficult to quantify the potential impact of compliance with or liability
under environmental protection laws, management believes that the ultimate
aggregate cost to the Company of environmental remediation, as well as other
legal proceedings arising out of operations in the normal course of business,
will not result in a material adverse effect upon its financial condition or
results of operations.

J. BUSINESS AND GEOGRAPHIC INFORMATION

The Company and its operating subsidiaries manufacture and sell metal
carboxylates, salts, and powders that are primarily derived from cobalt, copper
and nickel. Metal carboxylates are essential components in numerous complex
chemical and industrial processes, and are used in many end markets, such as
coatings, custom catalysts, liquid detergents, lubricants and fuel additives,
plastic stabilizers, polyester promoters and adhesion promoters for rubber
tires. Metal salts are used in a wide variety of end products, including
catalysts, colorants, rechargeable batteries, petroleum additives, magnetic
media and metal finishing agents. High specification metal powders have several
important characteristics that make them essential components in cemented
carbides for mining and machine tools, diamond tools used in construction,
rechargeable batteries, and alloyed materials for automotive, electronics,
transportation and catalyst applications. The Company operates in a single
business segment serving numerous customers and industries.

F-16
<PAGE> 47
OM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company's operations are located principally in the United States and
Finland. Financial information by geographic area is summarized as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
<S> <C> <C> <C>
Net sales:
United States................................... $149,114 $160,507 $274,200
Finland......................................... 202,114 219,754 207,122
Other........................................... 9,731 7,738 5,974
-------- -------- --------
$360,959 $387,999 $487,296
======== ======== ========

Operating profit:
United States................................... $ 12,108 $ 13,781 $ 29,162
Finland......................................... 37,227 44,063 48,623
Other........................................... 504 304 901
Corporate administrative expense................ (5,870) (6,727) (8,114)
-------- -------- --------
43,969 51,421 70,572
Other expense..................................... (5,451) (7,018) (12,595)
-------- -------- --------
Income before income taxes........................ $ 38,518 $ 44,403 $ 57,977
======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
<S> <C> <C>
Identifiable assets:
United States............................................ $163,252 $355,478
Finland.................................................. 273,590 240,551
Other.................................................... 6,614 5,034
-------- --------
$443,456 $601,063
======== ========
</TABLE>

K. SUBSEQUENT EVENTS

On January 30, 1998, the Company acquired Auric Corporation (Fidelity).
Fidelity, with annual sales in fiscal 1997 of approximately $48 million, is a
leading producer of electroless nickel, electroplating chemicals and metal
concentrates. The total consideration paid by the Company for Fidelity was $80
million, plus expenses.

On February 3, 1998, the Company acquired Dussek Campbell Limited (Dussek).
Dussek, with annual sales in fiscal 1997 of approximately $12 million, excluding
product lines not acquired, is a manufacturer of metal carboxylates. The total
consideration paid by the Company for Dussek was approximately $13 million, plus
expenses.

These acquisitions, which were financed entirely through bank borrowings,
are not reflected in the accompanying financial statements as of December 31,
1997 and will be accounted for by the purchase method of accounting.

F-17
<PAGE> 48
OM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

L. QUARTERLY DATA (UNAUDITED)

<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
<S> <C> <C> <C> <C>
1996
Net sales............................. $102,853 $101,485 $89,071 $94,590
Gross profit.......................... 20,211 21,030 20,905 21,828
Income from operations................ 12,258 13,084 13,036 13,043
Net income............................ 7,151 7,583 7,670 7,643
Net income per common share........... $.38 $.41 $.41 $.41
Net income per common
share -- assuming dilution.......... $.37 $.39 $.40 $.40
Market price: high-low................ 25 1/8 - 21 5/8 28 - 24 1/2 27 3/8 - 22 3/4 28 3/4 - 25 3/8
Dividends paid per share.............. $.07 $.07 $.07 $.07

1997
Net sales............................. $110,055 $124,334 $126,317 $126,590
Gross profit.......................... 26,578 29,483 29,949 31,353
Income from operations................ 15,696 17,869 18,320 18,687
Net income............................ 8,216 9,579 10,215 10,433
Net income per common share........... $.44 $.46 $.46 $.48
Net income per common
share -- assuming dilution.......... $.43 $.44 $.45 $.46
Market price: high-low................ 31 3/8 - 26 1/4 33 1/4 - 25 3/4 39 15/16 - 33 3/16 41 1/4 - 35 1/16
Dividends paid per share.............. $.08 $.08 $.08 $.08
</TABLE>

F-18
<PAGE> 49

======================================================

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SHARES BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information............... 3
Incorporation by Reference.......... 3
Prospectus Summary.................. 4
Risk Factors........................ 8
Forward-Looking Information......... 9
Use of Proceeds..................... 11
Price Range of Common Stock
and Dividends..................... 11
Capitalization...................... 12
Selected Financial Data............. 13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 14
Business............................ 18
Management.......................... 26
Security Ownership of Directors and
Officers.......................... 27
Underwriting........................ 28
Legal Matters....................... 29
Experts............................. 29
Index to Financial Statements....... F-1
</TABLE>

======================================================

1,750,000 SHARES

[OM GROUP LOGO]
OM GROUP, INC.

COMMON STOCK

------------------------
PROSPECTUS
------------------------

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

MERRILL LYNCH & CO.

FIRST ANALYSIS SECURITIES CORPORATION
JUNE 30, 1998

======================================================