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Evonik will acquire Air Products’ specialties

Purchase, for $3.8 billion, gives the German giant many businesses that complement its own

by Alexander H. Tullo
May 12, 2016 | A version of this story appeared in Volume 94, Issue 20

A worker testing the tensile strength of an elastomer at a lab.
Credit: Air Products
A worker tests the tensile strength of an elastomer at a lab at Air Products’ headquarters in Allentown, Pa.

Air Products & Chemicals has agreed to sell its performance materials division to the German specialty chemical maker Evonik Industries for $3.8 billion in cash.

Air Products Performance Materials at a glance




Total sales: $1.04 billion

Key epoxy-curing agent products: Curing agents, accelerators, and catalysts; adhesive promoters

Key polyurethane additive products: Catalysts, surfactants, and curatives

Key specialty additive products: Surfactants, dispersants, and defoamers

Note: Sales are for the 12 months ending March 31.

Source: Air Products & Chemicals

The division had been earmarked for inclusion in Versum Materials, the new chemical company that Air Products intends to spin off. Versum will now only include Air Products’ electronic materials business.

The performance materials division generated $241 million in pretax profits and about $1 billion in sales over the 12 months ending March 31.

The division’s largest business, at about 40% of its sales, is epoxy-curing agents. It also makes polyurethane catalysts and specialty additives for coatings and other sectors.

Evonik says these businesses closely intertwine with its own. “With this acquisition, we are expanding our portfolio with precisely the right markets, products, and innovations and continuing to invest in our growth and profitability,” Evonik CEO Klaus Engel says.

Engel told financial analysts that the acquisition “provides an excellent and complementary fit with Evonik on all levels.”

For example, Air Products has a strong polyurethane catalysts business, whereas Evonik is a leader in polyurethane foam stabilizers. Air Products’ wetting agents for coatings complement Evonik’s paint additives, including dispersants and specialty silicas. For the industrial and institutional cleaning market, Air Products’ amine-based surfactants complement Evonik’s oleo chemistry. Evonik makes isophorone cross-linkers for epoxies and polyurethanes. Air Products makes amine-based curing agents for epoxies.

Evonik expects the transaction to eventually generate annual cost and marketing synergies of $80 million. The companies anticipate completing the transaction by the end of this year.

Following the deal announcement, Moody’s took the unusual step of upgrading Evonik’s credit rating, noting that the acquired business is a “good fit” and that Evonik has “sufficient headroom” financially to support the purchase.

“I think the transaction is a win-win situation for both parties,” Seifi Ghasemi, Air Products’ CEO, told analysts. Air Products gets ample compensation for the business while furthering its goal of focusing on industrial gases.

The electronic materials business that Versum will comprise generated $974 million in revenues and $351 million in before-tax profits over the 12-month period that ended on March 31. The new company will offer materials for the electronics industry, including chemical mechanical planarization slurries, deposition precursors, and high-purity specialty gases. Air Products intends to complete the spin-off of Versum by the end of September.

The sale to Evonik and the Versum spin-off will net Air Products $2.8 billion after taxes and debt repayment. Ghasemi says Air Products will use this money for capital projects and acquisitions in industrial gases.

Having boosted productivity and inked divestitures, “Air Products has pulled many of the available levers,” says Jefferies stock analyst Laurence Alexander. Now, he would like to see the company spend more than $1 billion per year on capital expenditures.



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