Lanxess to buy Chemtura for $2.1bn in additives push

Bloomberg

Lanxess AG agreed to buy U.S. competitor Chemtura Corp. for about $2.1 billion in cash, more than doubling the size of its additives business and accelerating a shift towards specialty chemicals.
Shareholders of the maker of lubricant additives and flame retardants will get $33.50 a share under the terms of deal, Cologne, Germany-based Lanxess said in a statement Sunday. The offer is 19 percent higher than Philadelphia-based Chemtura’s close at $28.18 on Sept. 23. Lanxess shares rose as much as 12 percent, the most since April 2009, while Chemtura stock was up 17 percent to $32.94 in pre-market trading.
Management Board Chairman Matthias Zachert has been turning his attention to expanding Lanxess’ chemical units since placing its large rubber operations into a joint venture with Saudi Arabian Oil Co. in April. That meshed neatly with the goals of Chemtura Chief Executive Officer Craig Rogerson, who had been evaluating a potential sale since last year after divesting units that make pool chemicals and pesticides.
“Looking at what they are buying, the price and how they are financing it, I would say two thumbs up,” said Lars Hettche, an analyst at Bankhaus Metzler, who recommends buying the stock. “The question is whether they will get it for that price.”

Competition
Competition for Chemtura can’t be ruled out, though there aren’t any other companies that are so complementary and have the same synergy potential as Lanxess, Zachert said on a conference call with journalists on Monday. “We see the current price offered as a very fair value,” he said.
The planned purchase at a “fair” price demonstrates ongoing consolidation in specialty chemicals and a competing bid is unlikely to emerge, according to Ben Kallo, an analyst at Robert W Baird. Chemtura shareholders will probably vote on the deal at a shareholder meeting in two to three months, Zachert said.
Lanxess shares rose 8.5 percent to 52.84 euros as of 11:59 a.m. in Frankfurt. The stock has gained 24 percent this year for a market value of 4.8 billion euros ($5.4 billion).
The purchase builds on Lanxess’ additives businesses, allowing it to better compete in the market for lubricant chemicals against Berkshire Hathaway Inc.’s Lubrizol unit, and against flame-retardant producers such as Albemarle Corp. and Israel Chemicals Ltd., the company said in the presentation. The purchase adds 1.5 billion euros in sales compared with Lanxess’s current additives unit, which has 850 million euros in revenue.