US Eastman targets growth and earnings in $4.7bn Solutia bid

27 January 2012 12:15  [Source: ICIS news]

Solutia Headquarters (Source: Solutia)LONDON (ICIS)--US headquartered Eastman Chemical has bid to acquire speciality chemicals firm Solutia in a $27.65/share cash and stock offer valued at $4.7bn (€3.6bn), the companies said on Friday.

The directors of both firms have supported the transaction which is subject to approval by US-based Solutia's shareholders. The acquisition would broaden geographical reach and accelerate growth, they said. Completion of the deal is expected in mid 2012.

"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 Eastman CEO Jim Rogers.

"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 growth strategy.

Eastman is offering Solutia shareholders $22.0 in cash and 0.12 Eastman shares for each share of Solutia common stock they hold. The $27.65/share represents a 42% premium on Thursday’s Solutia closing price, Eastman said.

"This complimentary transaction will accelerate the growth of our businesses around the world," said Solutia CEO Jeffrey Quinn as he recommended the offer to shareholders.

Eastman sees Solutia as a strong strategic fit as the companies share complementary technologies and capabilities and a polymer-science “backbone”.

Eastman, headquartered in Kingsport, Tennessee, expects to have a compound annual growth rate in Asia Pacific of close to 10% over the next few years. The group said that it could make cost savings of $100m/year by the end of 2013 following completion of the acquisition.

Tax benefits from Solutia’s historical net operating losses would contribute approximately £1.0bn to free cash flow through 2013, it added.

Eastman raised its 2012 earnings per share (EPS) estimate to $5 and the expectation to greater than $6, excluding acquisition-related costs and charges.

($1 = €0.76)

By: Nigel Davis
+44 20 8652 3214

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