HOUSTON, Feb. 19, 2019 /PRNewswire/ — Kraton Corporation (NYSE: KRA) (“Kraton” or the “Company”) today announced initiatives to further enhance shareholder value. the Board of Directors (the “Board”) has initiated a process to review strategic alternatives for its CariflexTM business, which may result in a sale of that business. Separately, the Board has authorized a repurchase program for up to $50 million of the Company’s outstanding shares.

As previously announced, the Company will release its fourth quarter and full year 2018 financial results on February 27, 2019, and will host a conference call at 8:00 a.m. Central on February 28, 2019 to discuss those results. the Company expects to report 2018 Adjusted EBITDA in line with its revised full year guidance of approximately $380 million, excluding any adverse impacts from Hurricane Michael, as described more fully below.

“We believe that the high-margin Cariflex business and its attractive growth prospects are not appropriately valued as part of Kraton,” said Kevin M. Fogarty, Kraton’s President and Chief Executive Officer. “Moreover, in keeping with our strategy to continually manage our portfolio to drive value creation, we believe that a focus on enhancing Kraton’s core businesses, while strengthening the balance sheet to position the Company to take advantage of future growth opportunities, represents the best use of capital at this time,” added Fogarty.

The Company expects that the majority of proceeds from any full or partial monetization of the Cariflex business would be used to reduce debt in accordance with the Company’s goal of deleveraging as a means of increasing financial flexibility and driving long-term shareholder value.

“Over the last few years, we have driven down costs, generated cash to reduce indebtedness, and expanded our leadership position in our Polymer business, while adding a highly complementary Chemical segment. We are extremely proud of our Cariflex franchise, developed and commercialized largely over the past 10 years by an extremely talented and dedicated global business team,” said Fogarty. “Nevertheless, Cariflex for the most part is a standalone business at Kraton, with minimal revenue or cost overlap with our Polymer and Chemical segments. for this reason, we believe this business could be a strong strategic fit with several players that are better positioned to realize valuable synergies associated with it and unlock its full value. We believe our Polymer and Chemical segments present compelling growth opportunities, and future value creation for all stakeholders. We are focused on innovating to drive market development, continued margin expansion and further Sustainable differentiation for our customers,” Fogarty added.

There can be no assurance that the strategic review of Cariflex will result in the completion of a transaction. the Company’s Board has not set a timetable for the completion of the strategic review. Kraton has retained J.P. Morgan to act as its financial adviser for the process.

“As we evaluate capital allocation opportunities, the Company’s management and Board also believe that we have the opportunity to engage in a modest share repurchase program to deliver value to shareholders at this time, without deterring us from our focus on debt reduction,” Fogarty added.

The Board authorized the purchase of up to $50 million of Kraton’s common stock by March 2021. Repurchases may be made at management’s discretion from time to time through privately-negotiated transactions, in the open market, or through broker-negotiated purchases in compliance with applicable securities law. the repurchase program may be suspended for periods or discontinued at any time, and the amount and timing of the repurchases are subject to a number of factors, including Kraton’s stock price. the repurchase is not anticipated to have a significant impact on the Company’s ability to deleverage, and the Company remains on track to achieve a target consolidated net debt leverage ratio of less than 3.0:1 even without potential proceeds associated with the review of the Cariflex business.

2018 Adjusted EBITDA Expectation

The Company expects to report full year adjusted EBITDA in line with its full year guidance of approximately $380 million, which excluded any adverse impact related to Hurricane Michael, including any timing differences between actual lost sales in a particular period and the reimbursement under the Company’s business interruption insurance policy. During the fourth quarter 2018, the Company did receive reimbursement under its business interruption policy equal to its estimate of lost sales.