HOUSTON (ICIS)--Celanese’s $11bn acquisition of the bulk of DuPont’s Mobility & Materials (M&M) business will broaden Celanese’s customer base, particularly in Asia, strengthen its position in the growing electric vehicle (EV) sector, and yield big cost and revenue synergies, Celanese executives said on Friday.
Tom Kelly, senior vice president, Engineered Materials (EM), and CFO Scott Richardson, were briefing analysts in a webcast conference call shortly after the deal was announced on Friday morning.
The strategic fit of the M&M business with Celanese’s EM will position Celanese as “the pre-eminent” global specialty materials company, they said.
“With [M&M], we will immediately double the strength of the engineered materials product portfolio, in terms of leadership position, flagship industry brand, and backward integration,” Richardson said.
The acquired DuPont M&M business
- represents roughly $900m in estimated 2022
earnings before interest, tax, depreciation and
amortisation (EBITDA);
- supports run-rate synergies of about
$450m;
- purchase price reflects about 8x EBITDA
multiple, on a post-synergy basis.
Celanese will be acquiring a product portfolio focused primarily on four polymer families – nylons, specialty nylons, polyesters and elastomers.
With the M&M business, Celanese will become a leader in nearly a dozen different polymers globally, with backward integration in almost all of these polymers, the executives said.
Currently, Celanese participates in most of M&M’s polymers, but does not hold leadership positions or backward integration, they added.
As Celanese’s EM and the M&M businesses serve similar or the same markets, there are many cross-selling opportunities: Celanese can start selling its products to former DuPont customers, and it can start selling newly acquired M&M products to its existing customers.
Also, M&M's presence in Asia “is really strong”, accelerating Celanese’s business in that region, the executives said.
“The M&M business has really great customer relationships [in Asia], that we think we can leverage,” Richardson said.
A key growth opportunity will be electric vehicles (EVs), which Celanese sees as an opportunity for greater EM content, per vehicle, than internal combustion engine (ICE) vehicles.
Also, Celanese will see upside to earnings as global auto builds recover from the semiconductor supply squeeze.
SYNERGIES
- $275-350m of cost synergies, weighted
towards 2023/24, from: manufacturing and scale;
backward integration into polymerisation;
supply chain and procurement; overlapping
support functions.
- $125-150m of revenue synergies, assuming
Celanese can lift the M&M business to a
customer win rate equivalent to that of EM, and
that it can leverage a significantly broader
regional and customer reach to grow the
combined product portfolio.
During the call’s Q&A session, the executives addressed a number of other points, including:
Anti-trust review: Celanese does not see material concerns, no divestments expected;
HMD: Celanese does not expect to back-integrate into HMD, or HMDA (hexamethylenediamine, a feedstock for nylon), but will rather continue to contract for supply, “which makes sense” as the industry brings more HMD capacity online, the executives said;
PFAS: DuPont agreed to retain and indemnify Celanese for certain liabilities, including liabilities related to PFAS (per- and polyfluoroalkyl substances), making the M&M acquisition "a clean deal” for Celanese;
Debt: Celanese aims to reduce total debt to below 3x earnings before interest, tax, depreciation and amortisation (EBITDA) within two years of closing the M&M transaction. At closing, expected by the end of 2022, leverage will be just above 4x.
NOT INCLUDED
Celanese will not acquire M&M’s Auto
Adhesives, Multibase and
Tedlar polyvinyl fluoride film product
lines, which DuPont retains.
Also, DuPont is separately advancing the sales process for the DELRIN acetal homopolymer (H-POM) business.
Al Greenwood, Jonathan Lopez and Tom Brown contributed to this article
Thumbnail shows automobiles, an important end market for Celanese and the segment it is buying from DuPont. Image by Slavek Ruta/Shutterstock