Lanxess AG, the German specialty chemicals company, agreed to buy U.S. competitor Chemtura Corp. for about $2.1 billion in cash to expand its lubricant additives and flame retardants businesses.
Lanxess agreed to pay $33.50 a share, Cologne-based Lanxess said in a statement Sunday. The per-share offer is 19 percent higher than Philadelphia-based Chemtura’s close at $28.18 on Sept. 23. Pending approvals from regulators and Chemtura shareholders, the deal would close in the middle of next year.
Management Board Chairman Matthias Zachert has been turning his attention to expanding Lanxess’ chemical units since jettisoning its large rubber operations to a joint venture in April. That meshed neatly with the goals of Chemtura Chief Executive Officer Craig Rogerson, who had been evaluating a potential sale since last year after divesting units that make pool chemicals and pesticides.
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The purchase builds on Lanxess’ additives businesses, allowing it to better compete in the market for lubricant chemicals against Berkshire Hathaway Inc.’s Lubrizol unit, and against flame-retardant producers such as Albemarle Corp. and Israel Chemicals Ltd., the company said in the presentation.
The deal also takes Lanxess into two new lines: urethane polymers used to coat mining equipment and sporting goods, and organometallics, a type of compound often used as a catalyst.
The planned transaction is worth about 2.4 billion euros ($2.7 billion) including the assumption of Chemtura debt and pension obligations. It adds to a record $193 billion of chemical deals globally this year, led by Bayer Ag’s proposed acquisition of Monsanto Co. for $65.7 billion. Slow global growth also spurred record deal-making last year, including the December announcement of a merger between the largest U.S. chemical makers, Dow Chemical Co. and DuPont Co.
Chemtura in the 12 months through June earned $300 million before interest, taxes, depreciation and amortization on $1.7 billion in revenue, according to data compiled by Bloomberg.
Lanxess expects that by 2020 it can reduce costs by 100 million euros a year at the combined company, with a quarter of that savings rate to be achieved next year. Severance and other one-time costs will be about 140 million euros, the company said.
Chemtura’s financial adviser was Morgan Stanley, while Davis Polk & Wardwell LLP provided legal advice.
