Home / News / Composites producer Cytec merges with Solvay

Composites producer Cytec merges with Solvay

30 Jul '15

3 min read

Speciality chemicals manufacturer Solvay has entered into a merger agreement with Cytec, a producer of composite materials and mining chemicals for $75.25 per share in cash.

“The total cash consideration will amount to $5.5 billion, corresponding to an enterprise value of $6.4 billion,” a Solvay press release informed.

According to Solvay, the transaction price per share represents a premium of 28.9 per cent compared to the closing price of Cytec on July 28, 2015.

Cytec's composites businesses will be integrated into Solvay's Advanced Materials operating segment, while its mining chemicals and phosphine specialty chemical businesses will become part of Solvay's Advanced Formulations segment.

Headquartered in New Jersey with 4,600 employees across the globe, Cytec generated sales of $2.0 billion and a 20 per cent REBITDA margin in 2014.

It sources almost half of its sales from North America, nearly a third from the EMEA regions and the reminder from Asia Pacific and Latin America.

Cytec's principal market is primary and secondary structures for aircrafts and it is also developing new technological applications for composites in automotive.

Through the acquisition of Cytec, Solvay said it will gain critical scale and immediate customer intimacy in aerospace.

“In the automotive market, Solvay's strong positions with original equipment manufacturers and tier-one suppliers will help bolster Cytec's growth,” Solvay added.

Cytec will also significantly reinforce Solvay's sustainability profile as its offerings are addressing planet's challenges.

With Cytec, Solvay will stand out stronger in reducing CO2 emissions through its light weighting solutions and in dealing with the increasing scarcity of resources.

This transaction will underpin Solvay's REBITDA growth momentum, by driving top line growth and margin expansion.

Solvay expects annual synergies of more than €100 million, to be substantially realised within three years chiefly through cost savings and excellence.

Significant cross-selling opportunities have been identified with Specialty Polymers, both in aerospace and automotive, as well as with Novecare in oil & gas, agrochemicals and electronics.

“The non-recurring implementation costs are estimated at €75 million and the acquisition of Cytec will be accretive to adjusted EPS after the first year and to CFROI in the mid-term,” Solvay informed.

Solvay has arranged committed bridge financing for the transaction which it plans to fund with a €1.5 billion rights issue, €1.0 billion of additional hybrid instruments and a senior debt issuance.

The intended financing structure will help Solvay maintain its financial flexibility and strengthen its capital structure.

This will allow the Group to sustain its long-standing policy of growing its dividend over time, while preserving its investment grade credit rating. (AR)

Fibre2Fashion News Desk - India