LANXESS, Advent to acquire DSM engineering materials arm, establish joint venture

LONDON (ICIS)–LANXESS and Advent are to acquire the engineering materials division of Netherlands-based specialties player DSM, the companies said on Tuesday, with an eye to merging the operations with LANXESS’ own high-performance materials business.

Coming hours after an announcement by DSM of plans to merge with Switzerland-based flavours and fragrances player Firmenich, the Dutch company agreed to sell its engineering materials business, signalling its final transformation into a health, nutrition, and biosciences specialist.

Advent is to pay around €3.7bn for the DSM business, which is to be folded into a joint venture with LANXESS high-performance materials business, with the US-headquartered private equity firm to stand as the majority owner of the combined operations.

Advent is to pay out an additional €1.1bn to LANXESS, with the Germany-based chemicals business to hold a stake of around 40% in the joint venture, the companies said.

The deal is expected to close in the first half of 2023, with the combined DSM/LANXESS business expected to have combined annual sales of around €3bn.

The agreement also represents the latest move by LANXESS to reduce its exposure to more cyclic businesses, according to the company’s CEO, Matthias Zachert.

“LANXESS will once again become significantly less dependent on economic fluctuations. In addition, we as LANXESS will strengthen our balance sheet with the proceeds from the transaction and gain new scope for the further development of our group,” he said.

“With the new joint venture, we are forging a strong global player in the field of high-performance polymers. The portfolios, value chains and global positioning of the two businesses complement each other perfectly.”

Following the close of the deal, LANXESS core operations will consist of three units – advanced intermediates, consumer protection, and specialty additives, with the company expected to use proceeds from the sale to pay down debt and initiate a €300m share buy-back.

LANXESS, will have the option to divest its stake in the joint venture at the same valuation after three year, similar to the outcome when LANXESS spun its synthetic rubber operations into a joint venture with Saudi Aramco in 2015.

SYNERGIES
DSM’s engineering materials business consists of polyamides (PA6 and PA66), as well as various other grades and specialty polyesters, while LANXESS high-performance business produces PA6 and polybutylene terephthalate (PBT), as well as precursors caprolactam and glass fibre.

The DSM business employs 2,100 people, while the LANXESS operation has 1,000 workers, with key operations at Antwerp, Belgium and 10 production sites worldwide.

“The combination of LANXESS’ High-Performance Materials and DSM Engineering Materials creates a strong platform and brings together extensive expertise, resulting in the best opportunities for employees and more value for customers,” said Advent’s CEO, Ronald Ayles.

The move is the latest chemicals market consolidation bet by Advent, which has also moved to purchase European distributor Caldic and merge it with Latin America-based specialist GTM, with an eye to creating a global player in the space.

Front page picture: LANXESS’ headquarters in Cologne, Germany
Source: LANXESS