M&As: Covestro becomes majority stakeholder in DIC; Indorama buys Invista’s PET facility in Germany

German materials company Covestro says it has accelerated the expansion of its Thermoplastic Polyurethanes business (TPU) by raising its stake in its joint venture DIC Covestro Polymer Ltd. (DCP) from 50 to 80%. DCP, established as a 50/50 joint venture in the year 2000, is a supplier to the Japanese TPU industry. The investment is part of Covestro’s expansion of its global TPU business. The total investment sums up to a low double digit million EUR.

Both parties agreed to not disclose any further financial details of the transaction. Closing of the deal is planned for early second quarter 2019, subject to the approval from the relevant authority.

“The strong and long-term partnership of both companies, as well as our thorough understanding of the future growth potential make this acquisition a fitting step in Covestro’s growth strategy focusing on sustainability driven innovation“, said Dr. Markus Steilemann, CEO of Covestro.

Covestro is a supplier of high-performance resins and globally a top 3 producer of TPU. The TPU business is part of the Coatings, Adhesives, Specialties (CAS) segment and accounted for approximately 10% of the segment sales in FY 2017. The global TPU industry is estimated to grow at a long-term average of 6% a year, while Covestro outgrew the industry with double-digit core volume growth per year in the past three years.

DIC Corporation (DIC) says it will continue to support the success of DCP with its industry network, strong brand name, and as a reliable local partner. Production and R&D by DCP will continue at Sakai plant located in the DIC facility in Sakai, Osaka Prefecture, getting support from DIC such as supplying feedstocks and providing services on site. DIC is also an important partner for Covestro in other Coatings, Adhesives and Specialties business. The acquisition complements Covestro’s recent organic global capacity expansions of TPU sites in New Martinsville (US) and Changhua (Taiwan), which raises the respective annual TPU production capacities by approximately 25% each.

In other news, Thailand-headquartered Indorama Ventures Public Company Limited (IVL), a global chemical producer, announced that it has entered into an agreement to acquire Invista Resins & Fibers GmbH, which owns a high value-added PET manufacturing facility located in Gersthofen, Germany. The Gersthofen site has a combined capacity of 282,000 tonnes/year, and employs approximately 140 employees.

The transaction is expected to be completed in the 1st quarter 2019, subject to regulatory approvals.

IVL says Invista Gersthofen is a strong strategic fit with it and is aligned with its strategy to grow and support customer’s needs with differentiated solutions in both packaging and in industrial fibres. IVL will own the intellectual property rights of Polyshield PET and Oxyclear Barrier PET, Invista’s barrier technology, in all markets globally. Polyshield PET and Oxyclear Barrier PET brands are well-anchored in oxygen barrier packaging i.e. Ketchup.

Together with IVL’s HVA polymer business in America’s, Gersthofen will open new opportunities in several new markets and attractive segments.

PET packaging with an oxygen barrier is mainly used by the food and beverage industry to protect oxygen-sensitive products, such as juice, wine, beer, dairy as well as ketchup, sauces and other condiments throughout their entire shelf life. Demand for barrier resins is expected to grow at a strong pace, driven by the improved shelf life of packaged food products, the increasing health and hygiene concerns and the emergence of new recyclable PET applications over traditional materials such as glass and aluminum cans.

Currently, IVL has a leading market share in the North America oxygen barrier PET market.

Commenting on the acquisition, Aloke Lohia, Group CEO of Indorama Ventures said, “We are already capitalising on the opportunities in the US market, one of the largest barrier resins markets in the world - through our existing Oxyclear Barrier PET license in America’s. This strategic acquisition will evolve IVL to the next level of success by taking advantage of opportunities in global markets. With this acquisition, we reinforce our commitment to deliver the highest value to our customers and create sustainable long-term value for our shareholders.”

(PRA)

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