Solutia for sale: Eastman Chemicals buys company and its debt for US$4.7 billion

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Eastman Chemical has completed its bid for the acquisition of performance materials and specialty chemicals company Solutia for an approximate total of US$4.7 billion – including debt – in order to fuel its expansion into the specialty chemicals and plastics sector. Solutia’s shares are said to have fallen by 25% in 2011, although the company was active in its acquisitions process, having finalized the takeover of Southwall Technologies late last year.

Eastman Chemical – a spinoff of Eastman Kodak, which filed for bankruptcy earlier this month – has acquired Solutia for US$27.65 per share, representing a 42% premium for the shareholders. Solutia investors will receive US$22 in cash and the equivalent of 12% of a share in Eastman for each of their shares, according to the companies.

Eastman will pay US$3.38 billion in cash and will also take on Solutia’s outstanding debt; Solutia’s end-of-year results announcement in December revealed that it had reduced its debt by US$127 million to US$1.2 billion. Investment bank The Valence Group acted as independent advisor to the Board of Directors of Solutia during the acquisition phase.

An anticipated annual saving of US$100 million will be logged by Eastman Chemical by the end of 2013, according to the companies’ releases. Furthermore, with the new expertise in the chemicals and materials sector, Eastman is eyeing a CAGR of near 10% in the Asia-Pacific region over the coming years.

“The acquisition of Solutia is a significant step in our growth strategy,” commented Eastman’s CEO Jim Rogers. “Solutia has transformed itself into a financially strong, innovative performance materials and specialty chemicals company, with enviable market leading positions in virtually every market it serves.”

Further information on the acquisition is available here.

Full-year results

Aside from the acquisition, Solutia reported fourth quarter and full-year 2011 financial results. Net sales for the fourth quarter reached US$526 million; an 8% increase from the same period in 2010, while full-years sales reached US$2,097 million; an 8% increase from 2010. Solutia was able to pay down debt by US$127 million, reducing debt to US$1,224 million.

In its Advanced Interlayers sector, which includes solar materials, fourth quarter 2011 net sales totalled US$225 million, an increase of US$3 million or just 1% from the same period in 2010. 

However, adjusted EBITDA decreased US$4 million to US$46 million for the fourth quarter of 2011 compared to the prior year period, primarily due to lower average selling prices and volumes in the ‘Vistasolar’ EVA encapsulant business.

Solutia has been impacted by declining PV module prices and stiff competition from Asia-based suppliers as material pricing comes under pressure and module manufacturers seek lower cost materials to remain competitive.

The company reported Advanced Interlayers' 2011 annual net sales reached US$897 million, an increase of US$69 million or 8% from the same period in 2010.  Adjusted EBITDA increased US$4 million to US$194 million for 2011 compared to the prior year period. 

Solutia reiterated expected 2012 revenue to be between US$2.125 billion and US$2.275 billion.

Additional reporting by Mark Osborne.

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