Albemarle To Buy Specialty Chemical Maker Rockwood

Specialty chemical firm Albemarle has agreed to buy Rockwood Holdings for $6.2 billion in a cash and stock deal. The deal brings scale and product diversity that will be transformative for Albemarle, analysts say, giving the slow-growth firm access to high-growth and high-margin markets.

The deal values Rockwood at $85.53 per share, a 13% premium on its July 14 stock price. It will add $1.4 billion in annual sales of lithium chemicals and surface treatments to Albemarle’s more mature bromine chemicals and catalysts units.

The sale of Rockwood does not come as a surprise. In 2010, then-CEO Seifi Ghasemi told investors that the firm was considering spinning off its lithium operation in four to five years. Last September, it struck a deal to sell its titanium dioxide business to Huntsman Corp. for $1.3 billion. On July 1, Ghasemi left the firm to take the helm of Air Products & Chemicals.

Meanwhile, Albemarle has been eyeing lithium production to gain entry to the growing market for electric vehicle batteries. In 2011, it began a program to extract lithium from brine at its Magnolia, Ark., bromine facility.

The opportunity to add Rockwood’s lithium resources and production to Albemarle’s bromine expertise was a big reason for the deal, according to Luther C. (Luke) Kissam IV, Albemarle’s CEO. In a conference call with analysts, he said lithium would be the fastest growing of his firm’s four major businesses.

The lithium business will also help Albemarle hedge its portfolio risk in a future that may see a move away from gasoline as a transportation fuel, suggests Laurence Alexander, analyst at investment bank Jefferies. In 2013, Albemarle’s catalyst business, which supplies petroleum refiners, was responsible for 40% of its sales.

After the integration, Albemarle will be a $4 billion-per-year chemical company. The firm will use a projected $500 million in annual cash flow and $100 million in operating savings to pay down debt and invest for the future. “We will be in a position to pursue organic growth and other acquisitions,” Kissam said.