Leveraging synergies in the US specialty chemicals market, Eastman Chemical (Kingsport, Tennessee / USA; www.eastman.com) on 27 January announced that it had signed a definite agreement to acquire fellow US specialty chemicals producer Solutia (St. Louis, Minnesota; www.solutia.com). The transaction – which still has to meet the approval of Solutia’s shareholders and the relevant regulatory authorities – is valued at USD 4.7 bn. That figure is tantamount to USD 27.65 per Solutia share, representing a premium of 42% as of the market closing price on 26 January 2012. The companies said they expect final approval for the transaction to be forthcoming by mid-2012.

“The acquisition of Solutia is a significant step in our growth strategy and one that I am confident will strengthen Eastman as a top-tier specialty chemical company with strong, stable margins,” said Eastman CEO Jim Rogers, adding that the transaction would broaden his group’s geographic reach, especially in the Asia-Pacific region. By leveraging its infrastructure in this particular region, Eastman said it expects its Asia-Pacific compound annual growth rate (CAGR) to approach 10% over the next several years. Solutia CEO Jeffry Quinn also welcomed the deal, saying it would “accelerate the growth of our businesses around the world.”

As part of its regional diversification in emerging economies, Eastman last year acquired Brazilian plasticiser producer Scandiflex do Brasil (Mauá, São Paulo; www.scandiflex.com.br) – see Plasteurope.com of 09.09.2011 – and also strengthened its North American portfolio through the purchase of Sterling Chemicals (Houston, Texas / USA; www.sterlingchemicals.com) – see Plasteurope.com of 11.08.2011.

The Kingsport-based company plans to finance the cash part of the purchase through a combination of both cash on hand and debt. The transaction, which includes the assumptions of Solutia’s debt, is expected to deliver immediate value to Eastman stockholders through accretion and cash generation, Rogers said. The tax benefits from Solutia’s net operating losses alone are expected to contribute to free cash flow of about USD 1 bn through 2013. Looking ahead, Eastman said it expects its earnings per share (EPS) to reach USD 5 in 2012, exclusing acquisition-related costs and charges. With a view to 2013, the company even raised its EPS outlook to more than USD 6.

Since the two companies share several key fundamentals, including technology and polymer background, Eastman said it expects the takeover to yield annual cost synergies of about USD 100m, which it expects to achieve by the end of 2013. Key synergy areas include corporate costs, raw materials and improved manufacturing and supply chain processes. In addition, Eastman said it expects the overlap of key end-markets – in particular in the automotive and architectural sectors – to provide further opportunities for growth.

Aside from a wide range of copolyesters, Eastman also manufactures a lot of different plasticisers. At the end of 2010, the group divested its remaining PET business to DAK Americas (Charlotte, North Carolina / USA; www.dakamericas.com) – see Plasteurope.com of 26.10.2010. A specialty chemicals company, Solutia's foci range from the automotive sector to solar applications. Aside from PVB films, the group last year commissioned a new “Vistasolar” EVA manufacturing plant in Suzhou / China – see Plasteurope.com of 02.05.2011.