German specialty chemical producer Lanxess has agreed to buy Philadelphia-based Chemtura, a maker of lubricant additives, plastics flame retardants, urethanes, and organometallics, in a cash deal worth roughly $2.5 billion. The $33.50 per share Lanxess will pay represents an 18.9% premium over Chemtura’s stock price on Sept. 23, the business day before the deal was announced.
The acquisition, the largest in Lanxess’s history, was driven by the company’s desire to grow its additives business and push further into specialty chemicals. It marks a turn to growth after a major restructuring that spanned 2014–15 under new CEO Matthias Zachert. Zachert cut costs and sold a 50% stake in the firm’s synthetic rubber business to Saudi Aramco to lessen its exposure to the volatile rubber market.
Chemtura’s additives for lubricants and plastics will complement the rubber additives made by Lanxess’s Rhein Chemie business. Overall, Lanxess will gain a greater presence in profitable mid-sized markets and a larger footprint in North America, according to a Lanxess investor presentation.
“With this acquisition, we are forming a champion in the field of additives and are strengthening our already-profitable portfolio,” Zachert says. Lanxess forecasts that the deal will boost earnings in the first fiscal year after closing and provide cost savings of $100 million annually starting in 2020.
The announcement comes about a year after Chemtura CEO Craig A. Rogerson signaled that his firm would be open to a buyer. The deal “provides premium value to our shareholders and benefits our customers and employees by making Chemtura part of a larger, stronger global enterprise,” he says.
Rogerson has been busy with restructuring and streamlining of his own since Chemtura’s 2010 bankruptcy in the wake of the global financial crisis. The effort seemed to pay off in 2015 when the firm earned $101 million, up 26% from 2014, on sales of $1.7 billion.
Both Lanxess and Chemtura investors appear to be pleased with the proposed transaction; Lanxess shares rose 18% and Chemtura’s were up 16% when the markets opened on Monday. The deal is subject to a Chemtura shareholder vote in the next two or three months and is expected to close around mid-2017.