Lanxess AG and global private equity firm Advent International are joining forces to acquire Royal DSM NV's engineering materials business for 3.7 billion euros ($3.95 billion).
The business being acquired has annual sales of about 1.5 billion euros ($1.6 billion) and an EBITDA (earnings before interest, taxes, depreciation and amortization) margin of about 20 percent, officials with Lanxess in Cologne, Germany, said in a May 31 news release.
Officials said the business is one of the leading global suppliers in high-performance specialty materials that address key market needs in electronics, electrical and consumer goods.
Lanxess will contribute its own High-Performance Materials unit to the joint venture. HPM is a leading supplier of high-performance polymers, primarily to the automotive sector. That business has annual sales of around 1.5 billion euros ($1.6 billion).
Advent will hold at least 60 percent in the joint venture. Lanxess will receive an initial payment of at least 1.1 billion euros ($1.18 billion) and a stake of up to 40 percent. The firm will use the proceeds of the transaction to reduce debt and to strengthen its balance sheet.
Lanxess also has the option to divest its stake in the joint venture to Advent at the same valuation after three years. The deal is expected to close in the first half of 2023.
In the release, Lanxess CEO Matthias Zachert said that with the joint venture, his firm "will once again become significantly less dependent on economic fluctuations."
"With the new [joint venture], we are forging a strong global player in the field of high-performance polymers," he added. "The portfolios, value chains and global positioning of the two businesses complement each other perfectly."
Lanxess was formed in 2004 when Bayer AG spun off its chemical division and part of its polymers business.
Advent Managing Partner Ronald Ayles said that "joining forces with Lanxess in this industry transforming transaction is a highlight for Advent, as we have built a trusted, long-standing relationship and share the highest mutual respect."
The DSM unit makes nylon, PET, polybutylene terephthalate, copolyester and other materials. It employs 2,100 worldwide at eight production sites and seven R&D centers.
Lanxess is a maker of specialty chemicals and plastics that employs 14,900 and posted sales of 6.1 billion euros ($6.8 billion) in 2020.
The JV will include DSM sites in Geleen and Emmen, Netherlands; Shangyu and Jiangyin, China; Pune and Pantnagar, India; Genk, Belgium; Kaohsiung, Taiwan; and Evansville, Ind.
Lanxess sites included in the JV are in Brilon, Hamm-Uentrop and Krefeld-Uerdingen, Germany; Wuxi and Changzhou, China; Antwerp, Belgium; Jhagadia, India; Porto Feliz, Brazil; and Gastonia, N.C.
At Lanxess, the HPM unit makes nylon 6 and PBT resins and thermoplastic fiber composites. The unit employs 1,900 at 10 production and seven R&D sites worldwide. Its main production site is in Antwerp, Belgium, where it makes nylon 6, caprolactam feedstock and glass fibers.
Officials added that both Lanxess and DSM "are pioneers in sustainability" and offer bio-based and recycled-based alternatives across their product portfolios. Lanxess recently launched a high-performance resin made from 92 percent sustainable raw materials.
The new JV also will focus on the automotive industry, officials added. Resins made by the JV are used in lightweight elements in structural auto parts and also in interiors, often replacing metal parts. The materials save weight and reduce CO2 emissions in these applications.
In electric vehicles, materials made by the JV are used in battery and charging systems, electronic control systems and power electronics. The materials also are used in the electrical and electronics industry in components for smartphones, IT and household appliances.
The sale to Lanxess continues an eventful year for DSM. In April, the firm sold its protective materials business — including Dyneema-brand fiber — to Avient Corp. of Avon Lake, Ohio, for nearly $1.5 billion. Estimated sales for that business in 2022 are $415 million. The business includes six production facilities, four R&D centers and approximately 1,000 employees.
In February 2021, Lanxess bought specialty chemical producer Emerald Kalama Chemical BV of Vancouver, Wash., for almost $1.1 billion. Lanxess acquired Emerald Kalama from Emerald Performance Materials LLC, which is majority-owned by U.S. private equity firm American Securities LLC. Emerald Kalama employs about 500 and has annual sales of around $425 million.
The Lanxess-Advent-DSM deal first was rumored by Germany's Handelsblatt newspaper in late January. DSM in September had announced plans to review its operations and possibly sell the materials unit.
Officials said at that time that the business will likely not be able to "maximize their full potential to drive the important industrial shift to a bio-based and circular economy." The unit has been managed largely on a standalone basis since the announcement.
Boston-based Advent has $88 billion in assets under management. Its holdings include German acrylic resin maker Röhm GmbH.