TORONTO (miningweekly.com) – Spain-based silicon metal, silicon alloys and ferroalloys producer Grupo FerroAtlántica and Miami, Florida-based Globe Specialty Metals will combine in an all-stock transaction to create an international silicon and specialty metals producer with a combined enterprise value of about $3.1-billion.

The companies announced that they had entered into a definitive agreement under which the two companies would be combined this week.

Grupo Villar Mir, one of Spain’s largest private companies, was currently wholly owned by FerroAtlántica.

The new entity would be strategically positioned to benefit from fast-growing demand for solar, automotive, consumer products (silicones), construction and energy, and the new company would be a significant producer of silicon metal, silicon alloys and ferroalloys.

The new company would have pro-forma combined revenues of about $2.3-billion and earnings before interest, taxes, depreciation and amortisation of about $325-million before synergies and would capitalise on an enhanced product offering and a diversified production base.

It would have an expanded geographic reach, building on Globe’s footprint in North America and FerroAtlántica’s footprint in Europe, including access to FerroAtlántica’s cost-efficient sources of hydroelectric power.

The transaction, which had been unanimously approved by both companies’ boards, was expected to be accretive to Globe’s shareholders on an earnings a share basis in the first year following completion.

The combination was expected to realise substantial synergies in three key areas – cost synergies of about $65-million a year, an additional $30-million of synergies from the refinancing of existing debt and other financial savings, and about $100-million released in cash flow over three years through more efficient working capital management and by adoption of other efficiencies.

Globe operated 11 production facilities and three mining sites in six countries, with almost 90% of its revenues coming from North America. FerroAtlántica operated 20 facilities – 15 production plants and five mining sites – in five countries and owned hydroelectric power assets in Spain and France, with a majority of its revenues coming from Europe.

Upon closing, which was slated for the fourth quarter this year, the two companies would be combined under a newly formed holding company that would be organised in the UK and headquartered in London, one of the global centres for the metals and mining industry.

Globe executive chairperson Alan Kestenbaum would lead the new company’s nine-member board and FerroAtlántica would designate the executive vice-chairperson.

Globe’s current CEO, Jeff Bradley, and FerroAtlántica’s current chairperson and CEO, Pedro Larrea Paguaga, would be co-CEOs of the new company.

At close, Grupo Villar Mir would hold a 57% stake in the new company and current Globe shareholders would hold a 43% stake. Globe intends to continue its current dividend policy through the closing date.

Goldman Sachs and Nomura Securities International were acting as financial advisers to Globe and Latham & Watkins was acting as legal adviser.

Société Générale was acting as financial adviser to FerroAtlántica. Cravath, Swaine & Moore and Uria Menendez were acting as legal advisers.