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Lanxess Shares Rise on Acquisition of Chemtura

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09/26/2016 | 02:35am CEST

FRANKFURT-Shares in Germany's Lanxess AG jumped Monday on news the chemicals company would buy U.S.-based Chemtura Corp. for ?2.4 billion ($2.7 billion), in a deal that should help it expand beyond its synthetic rubber business.

At 1300 GMT, shares in the midcap company were up 7.7% at ?52.44, topping the MDAX index.

Lanxess said the acquisition-its largest ever-would expand its activities in additives for lubricants and flame retardants and strengthen business in North America. The value of the deal corresponds to roughly $33.50 per share of Chemtura. That represents an 18.9% premium to the stock's closing price of $28.18 on Sept. 23, Chemtura said.

The acquisition adds to a crowd of outbound deals by German companies this year. This month, Lanxess's former parent company, Bayer AG, announced a $57 billion agreement to buy Monsanto Co. in the U.S., putting 2016 on track to be the biggest year for German outbound M&A since 2007, according to data from Dealogic.

Lanxess hasn't made a secret of being on the hunt for acquisitions. The Chemtura buy is part of its strategy to move further away from its synthetic rubber business, which has been pinched by overcapacity and has a high exposure to the car and tire industry. In September last year, the company sold a 50% stake in the business to Saudi Aramco for ?1.2 billion.

"With this acquisition, we are forming a major global player in the field of additives and are significantly strengthening our already profitable portfolio," Lanxess Chief Executive Matthias Zachert said.

Lanxess now counts among its core activities high performance plastics, ingredients for drugs, pigments for construction materials, and water treatment technologies.

The German company plans to fund the deal with existing liquidity and issuing new debt. Lanxess said it secured bridge financing, which will quickly be refinanced via senior bonds and a hybrid bond. The deal, which is subject to approval from Chemtura shareholders and antitrust authorities, is expected to close around mid-2017.

To preserve liquidity, Lanxess said it would scrap a share buyback announced earlier this year.

The acquisition of Chemtura would be Lanxess's second acquisition of a U.S.-based company. Earlier this year, it bought the cleaning and disinfectant specialist business of Chemours for roughly ?210 million. Previous acquisitions included the 2010 takeover of DSM Elastomers for about ?310 million and Brazil's rubber maker Petroflex in 2008 for ?280 million.

"Given the business fit of the two companies and the reasonable price tag, we regard Lanxess's move as a positive one," said Oliver Schwarz of Warburg Research. He said the company's aim of achieving 100 million euros in recurring synergies was "ambitious, but achievable."

Mr. Zachert said he didn't expect any major antitrust hurdles to closing the deal. On a conference call, he said he couldn't rule out rival bidders for Chemtura, but didn't expect another company could offer the same complementarity and synergy potential.

Write to Natascha Divac at natascha.divac@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
BAYER 2.79% 78.21 Delayed Quote.-25.65%
LANXESS -1.86% 57.16 Delayed Quote.-12.17%
MDAX -0.65% 23719.03 Delayed Quote.-8.89%
MONSANTO 0.00%-End-of-day quote.9.57%
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Financials (€)
Sales 2018 7 076 M
EBIT 2018 593 M
Net income 2018 382 M
Debt 2018 1 975 M
Yield 2018 1,61%
P/E ratio 2018 14,59
P/E ratio 2019 13,16
EV / Sales 2018 1,03x
EV / Sales 2019 0,96x
Capitalization 5 328 M
Duration : Period :
Lanxess Technical Analysis Chart | MarketScreener
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Technical analysis trends LANXESS
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 27
Average target price 74,8 €
Spread / Average Target 28%
EPS Revisions
Matthias Zachert Chairman-Management Board
Matthias L. Wolfgruber Chairman-Supervisory Board
Michael Pontzen Chief Financial Officer
Werner Czaplik Member-Supervisory Board
Theo H. Walthie Member-Supervisory Board
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