UPDATED — Brussels, Belgium-headquartered chemicals giant Solvay SA has announced plans to buy U.S. composite materials firm Cytec Industries Inc. in a $5.5 billion deal.
Composite materials represent two-thirds of Cytec's $2 billion in annual sales. Cytec's primary market is in aerospace composites, but the companies expect to work on new applications for lightweight automotive composites, thanks to Solvay's strong position with automotive OEMs and Tier 1 suppliers.
The proposed acquisition is “a unique opportunity for Solvay to boost its customer offerings in lightweighting with advanced materials in aerospace and automotive, as well as to strengthen its know-how with activities in mining chemicals,” Solvay CEO Jean-Pierre Clamadieu said in a news release.
Market analyst Phil Karig said Solvay is paying a healthy EBITDA multiple in the deal, largely for Cytec's aerospace composites business. But he added that Solvay “certainly sees additional opportunities for nurturing and expanding Cytec's sales of composites and related systems into the global automotive market.”
Karig — managing director of Mathelin Bay Associates LLC in St. Louis — also said that from a “green perspective,” Cytec products support fossil fuel savings through lightweighting of aircraft and automobiles. The firm's composites and film products also bring Solvay greater exposure to renewable energy markets such as wind turbines and solar panels, he added.
Cytec's polymer-based aerospace products include thermoset and thermoplastic prepregs, preforms and resin infusion systems. In the automotive market, Cytec makes prepregs, resin systems and adhesives suitable for composite-to-composite, composite-to-metal and metal-to-metal bonding.
Cytec also makes polymer additives, with a specialty in UV stabilizers. The Woodland Park, N.J., company has 4,600 employees across the globe. It generated 2014 sales of $2 billion — up almost 4 percent vs. 2013 — with more than half in North America.
Solvay and Cytec do not compete against each other and have very little overlap, Cytec spokeswoman Jodi Allen said in a July 30 email.
“Most of the portfolio is complementary,” she added. “The two companies had very similar growth strategies and both are leaders in their respective technology areas…We don't anticipate any concerns about the merger from [competition].”
Allen said she had no information about continuing operations of Cytec locations. Solvay officials could not be reached for comment.
Cytec CEO Shane Fleming said Solvay's expertise in specialty polymers and formulations should accelerate Cytec's growth.
Solvay is paying $75.25 per share in cash for the business. Cytec's shares had closed at $58.39 on July 28, the day before the deal was announced.
Wall Street reaction to the deal was positive, sending Cytec's per-share stock price up 26 percent to almost $74 in early trading July 29. The stock had been near $45 at the start of 2015.
Cytec's sales for the first half of 2015 essentially were flat at $1.02 billion. Company profit for the half fell 25 percent to $97.2 million, mostly from special items including pension funding and resturcturing.
In 2014, Cytec made deals with two German firms — partnering with composites developer C-Con Holdings GmbH to promote carbon-fiber reinforced plastics in vehicles, and joining with acrylic fiber maker Dralon GmbH to find lower-cost ways of creating carbon fiber.
Cytec was formed in 1993 when it was spun off from American Cyanamid Co., a U.S. industrial conglomerate that as recently as the 1980s was one of America's 100 largest manufacturers. American Cyanamid once owned such brand names as Formica, Centrum, Old Spice and Pine-Sol. Other parts of the now-defunct firm are owned by Pfizer Corp., BASF SE and Procter & Gamble.
Cytec CEO Shane Fleming said Solvay's expertise in specialty polymers and formulations should accelerate Cytec's growth.
Solvay is paying $75.25 per share in cash for the business. Cytec's shares had closed at $58.39 on July 28, the day before the deal was announced.
Solvay expects the deal to close in the fourth quarter.
Solvay also revealed its second quarter financial highlights, reporting that group net sales were 2.68 million euros, up 4.2 percent year-on-year.
New plant in China
Meanwhile, Solvay has begun production at its new fluoroelastomers (FKM) plant in Changshu, China, as part of its ongoing strategic site expansion.
The new operation aims to meet demand for its specialty polymers from Asia's fast-growing automotive industry and other high-end markets.
The Changshu site is Solvay Specialty Polymers' third fluorelastomer unit in the world and benefits from raw material supplies through its joint venture with nearby Shanghai 3F New Material Co.
