Trinseo will buy Arkema’s methacrylates business

In a bid to diversify and focus on higher-profit materials, the styrenic resins maker Trinseo has agreed to buy Arkema’s polymethyl methacrylate (PMMA) business for about $1.4 billion.

PMMA, popularly known as acrylic resin, is used in applications such as transparent barriers, light covers, and signs. Arkema is one of the top three producers of the resins in Europe and North America, where it operates four and three plants, respectively. The French firm holds the Plexiglas trademark in the Americas, while its larger competitor Röhm owns it everywhere else. Arkema is also back-integrated into PMMA’s monomer, methyl methacrylate.

The Arkema business is projected to have 2020 sales of $620 million and earnings before taxes of about $150 million. Trinseo, which posted sales of $3.8 billion in 2019, is targeting $50 million in cost savings from the transaction.

In a conference call with analysts, Trinseo CEO Frank Bozich said the purchase stems from a portfolio review the firm conducted 18 months ago. The review recommended focusing on engineering materials like its acrylonitrile-butadiene-styrene polymer business and on latex.

PMMA, the review determined, is an attractive “adjacent chemistry” that Trinseo could acquire. The purchase, Bozich said, “is the first step in the transformation of Trinseo to become a specialty solutions provider.”

To that end, Trinseo also announced it is looking to divest its synthetic rubber business. Bozich said it has already found interest from potential buyers and may have a deal inked during the first half of 2021, about when the Arkema deal is scheduled to close. Trinseo may divest other commodity chemical businesses as well, he said.

Frank J. Mitsch, a stock analyst who covers Trinseo for Fermium Research, wrote to clients that he sees “merit in this transaction” and in follow-up deals, though he downgraded Trinseo’s stock because of near-term economic considerations.

Arkema, meanwhile, says the divestiture is part of its own move to higher-end specialty chemicals, such as adhesives and advanced materials. The company announced in April that it was looking to divest the PMMA business.

Arkema isn’t the only large European chemical firm to divest a PMMA business to sharpen its focus on specialties. Last year, Evonik Industries sold its business for $3.4 billion to the private equity firm Advent International, which renamed it Röhm.