Solvay to buy Cytec for US$5.5 bn; expands composites offerings

Brussels-headquartered chemicals group Solvay has agreed to buy US peer Cytec for US$5.5 billion, to forge its presence in the composites sector with demand for materials from the aerospace sector growing. It will acquire 100% of Cytec’s share capital for US$75.25 per share in cash and will finance the transaction with a US$1.66 billion rights issue.

Solvay Chief Executive Jean-Pierre Clamadieu said the acquisition offers “a unique opportunity for Solvay to boost its customer offerings in light weighting with advanced materials in aerospace and automotive, as well as to strengthen its know-how with activities in mining chemicals.” He added, “Cytec is a high-growth, high-quality group with leading market positions. We are looking forward to working with its excellent teams. This acquisition will create value for our stakeholders and will support our ambition to become a leader in sustainable chemistry. This transaction will lead us to further accelerate our transformation.”

The Belgian company said the enterprise value, which includes debt, is US$6.4 billion, representing a 2015 estimated core profit (EBITDA) multiple of 14.7 times and of 11.7 times when considering potential benefits. Solvay expects to make annual savings of EUR100 million, within three years.

Headquartered in New Jersey with 4,600 employees across the globe, Cytec generated sales of US$2 billion and a 20% REBITDA margin in 2014. It sources almost half of its sales from North America, nearly a third from EMEA and the remainder from Asia Pacific and Latin America.

Cytec is among the world leaders in composite materials and in mining chemicals. In the fast-growing composite materials sector, which represents two thirds of its sales, its principal market is primary and secondary structures for aircrafts. It is also developing new technological applications for composites in automotive. Cytec is the leader in tailored speciality chemical formulations to enhance mining separation processes.

Through the acquisition of Cytec, Solvay will gain critical scale and immediate customer intimacy in aerospace. In the automotive market, Solvay’s strong positions with original equipment manufacturers and tier-one suppliers will help bolster Cytec’s growth.

Moreover, Cytec will significantly reinforce Solvay’s sustainability profile as its offerings are addressing planet’s challenges. With Cytec, Solvay will stand out stronger in reducing CO2 emissions through its lightweighting solutions and in dealing with the increasing scarcity of resources through more efficient and cleaner mining technologies, says Solvay.

Cytec’s composites businesses will be integrated into Solvay’s Advanced Materials operating segment. Its mining chemicals as well as its niche additives and phosphine specialty chemical businesses will become part of Solvay’s Advanced Formulations segment.

Significant cross-selling opportunities have been identified with Speciality Polymers, both in aerospace and automotive, as well as with Novecare in oil & gas, agrochemicals and electronics. The non-recurring implementation costs are estimated at EUR75 million.

Solvay has previously said it would focus on acquisitions in North America because of lower energy costs. Solvay expects the deal will close in the fourth quarter of the year.

In related news, Solvay recently announced its second quarter results, with its core profit, adjusted for one-off items rising 8.1% in the second quarter to EUR500 million. The company said its speciality materials and chemicals businesses gained, but demand declined substantially for chemicals used in the oil and gas sector.