Eastman buys Solutia
By Eastman Chemical Company
By Eastman Chemical Company
Feb. 2, 2012 – Eastman Chemical Company and Solutia have announced an agreement under
which Eastman will acquire Solutia, a global leader in performance
materials and specialty chemicals for approximately $4.7
billion, including the assumption of Solutia’s debt.
“The acquisition of Solutia is a significant step in our growth
strategy and one that I am confident will strengthen Eastman as a
top-tier specialty chemical company with strong, stable margins,” said
Jim Rogers, chairman and CEO of Eastman. “The
addition of Solutia will broaden our geographic reach into emerging
geographies, particularly Asia Pacific, establish a powerful combined
platform with extensive organic growth opportunities, and expand our
portfolio of sustainable products, all of which are consistent with our
“This transaction is also expected to deliver immediate value to our
stockholders in the form of accretion and strong cash generation, as
well as create potential upside through the combination of two leading
global chemical companies,” said Rogers.
"This complementary transaction will accelerate the growth of our
businesses around the world. The shared commitment to innovation,
quality and technical service will allow us to better serve our
customers and creates opportunity for our employees around the globe,"
said Jeffry N. Quinn, chairman, president and CEO of
Solutia. "This transaction provides Solutia’s shareholders with
immediate value and an attractive premium, as well as the opportunity to
benefit from the future prospects of a leading global chemicals
producer with the financial strength, a diversified mix of premium
products, and the geographic footprint to capitalize on long-term growth
“I commend the excellent management team and employees of Solutia.
Over the past several years, 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,” added Rogers. “That, in addition to both
companies’ success integrating prior acquisitions, gives me confidence
we will achieve a smooth transition. We look forward to welcoming
Solutia employees to Eastman.”
Eastman and Solutia share several key fundamentals, such as
complementary technologies and business capabilities, a polymer science
backbone, similar operating philosophies and a high performance culture.
In addition, the overlap of key end-markets is expected to provide
opportunities for growth.
This acquisition is also a significant step in Eastman’s strategy to
extend its global presence in emerging markets. In particular, it should
significantly accelerate Eastman’s growth efforts and offer excellent
growth opportunities in Asia Pacific. By leveraging infrastructure in
the region, Eastman expects to have a compound annual growth rate in
Asia Pacific approaching 10 percent for the next several years.
Eastman expects the transaction to be immediately accretive to
earnings, excluding acquisition-related costs and charges. After giving
effect to the acquisition of Solutia, including expected cost synergies,
Eastman expects 2012 EPS to be approximately $5 excluding
acquisition-related costs and charges. Eastman is also increasing its
2013 EPS expectation to greater than $6.
Eastman has identified annual cost synergies of approximately $100
million that are expected to be achieved by year-end 2013. Key areas of
value creation include the reduction of corporate costs, raw material
synergies, and improved manufacturing and supply chain processes.
Further, Eastman expects to realize significant tax benefits from
Solutia’s historical net operating losses and other tax attributes that
are expected to contribute to free cash flow (defined as cash from
operations minus capital expenditures and dividends) of approximately
$1.0 billion through 2013.
Eastman also recognizes the potential for meaningful revenue
synergies by leveraging both companies’ technology and business
capabilities and end-market overlaps, particularly in automotive and
Eastman intends to finance the cash portion of the purchase price
through a combination of cash on hand and debt.
The transaction, which was approved by the boards of directors of
both companies, remains subject to approval by Solutia’s shareholders
and receipt of required regulatory approvals as well as other customary
closing conditions. The transaction is expected to close in mid-2012.