Covestro has agreed to purchase DSM’s resins and functional materials business for about $1.8 billion. The business generated sales in 2019 of about $1.2 billion and a pretax profit of $150 million. The companies expect to complete the deal in the first quarter of 2021.
The deal will lift Covestro’s sales in coatings, adhesives, and specialty materials by more than 40% while adding 20 production sites. Products involved in the deal include 3-D printing materials, antireflective coatings for photovoltaic panels, adhesives for recyclable carpets, acrylic resins for paints, and optical fiber coatings.
Covestro says the acquisition fits its strategy of diversifying into markets for technical and sustainable materials, a direction the German company has been taking since it was spun off from Bayer in 2015. The firm notes that it is already a leading player in water-based polyurethanes for coatings.
Covestro expects to wring savings of about $140 million annually from the deal. Two thirds of the savings will come from aligning purchasing, sales, and administrative functions of existing and acquired businesses; one third will come from an expected hike in sales from activities such as cross-selling.
For DSM, the sale is another step in a shift away from materials as it increasingly focuses on nutrition and health products. The Dutch firm recently acquired food technology companies Erber Group, Glycom, and CSK.