In an all-cash deal, DL Chemical Co. Ltd. is acquiring materials firm Kraton Corp. for $2.5 billion.
Houston-based Kraton is a maker of styrenic block copolymers, pine-based biomaterials and related products. DL of South Korea previously was known as Daelim Industrial Co. Ltd.
The sale price represents a 50 percent premium to Kraton's trading value in early July. Under terms of the deal, Kraton stockholders will receive $46.50 in cash for each share of Kraton common stock.
"Following an extensive review of a wide range of strategic alternatives … Kraton's Board has determined that the sale of Kraton to DL Chemical is in the best interest of Kraton stockholders," Kraton CEO and President Kevin Fogarty said in a Sept. 27 news release.
He added that Kraton officials "believe DL Chemical has the industry presence and resources to continue to support the growth of Kraton's business on a global scale."
Kraton Chairman Dan Smith said in the release that the deal "marks the culmination of the strategic review process for Kraton, resulting in a transaction that we believe provides significant value for Kraton stockholders."
As Daelim, DL bought Kraton's Cariflex-brand isoprene rubber business for $530 million in late 2019.
"After acquiring [Cariflex] last year, we have successfully integrated that business within the DL Group," said Sang Woo Kim, vice chairman and CEO of DL Chemical. "We also have been highly interested in Kraton's specialty polymer and bio-based chemical business, and this combination will allow us to provide our customers with a wider range of innovative products."
DL is a market leader in polybutylene, with annual production capacity of more than 400 million pounds. The firm also makes specialty polyethylene resins and oligomers.
Industry consultant Robert Eller said that driving forces such as seeking global reach and entry into high-growth markets are present in the DL-Kraton deal.
“It’s not unusual for a petrochemical company to have ownership of a TPE supplier,” said Eller, president of Robert Eller Associates LLC in Akron, Ohio. Companies such as DL “are present in a broad range of markets, appliances for example, beyond their petrochemical base,” he added.
SBCs “have entered a broad range of markets and applications but it’s too early to label it a mature technology,” Eller said.
“And then we come to very attractive offers at high multiples of stock price that essentially force public companies to present the offering to stockholders, especially if there are raw material or market synergies and opportunities to achieve scale as in the case of Kraton,” he added.
Kraton posted sales of almost $1.6 billion in 2020. On Wall Street, Kraton's per-share stock price began 2021 near $29 but was around $45.40 in early trading Sept. 28 for an increase of more than 55 percent.