PolyOne Corp.'s pending acquisition of the masterbatch concentrates business of Clariant AG is winning high praise from market watchers.
Avon Lake, Ohio-based PolyOne announced plans Dec. 19 to acquire that global business for $1.45 billion. The agreement followed months of speculation between Muttenz, Switzerland-based Clariant and Saudi Arabian conglomerate Sabic.
The PolyOne-Clariant deal is set for completion in the third quarter and values the Clariant business at about 11.1 times the annual earnings before interest, taxes, depreciation and amortization (EBITDA).
On a Dec. 19 conference call, PolyOne CEO, President and Chairman Robert Patterson described the acquisition as "a perfect match and one that aligns with the world's megatrends." He added that the deal is "truly transformational" for PolyOne and will make the firm a $4 billion business that will be "truly global."
In a recent research note, market analyst Kevin Hocevar of Northcoast Research in Cleveland said that "in our opinion, [Clariant's masterbatch business] has always been the holy grail for PolyOne, as it combines the company with its largest color/additive competitor … creating the unmatched global leader in the space."
Hocevar added that his firm views the multiple that PolyOne will pay for the Clariant unit "quite favorably," since it's slightly less than the 11.9 multiple that PolyOne's stock was trading at when the deal was announced. PolyOne expects $20 million in run-rate synergies by the end of the first year after the acquisition and a total run rate of $60 million by the end of the third year.
"Overall, we view these announcements very favorably for PolyOne, as we always viewed Clariant as the big M&A opportunity for the company while at the same time the core business is exceeding expectations," Hocevar said. "We believe this is a game-changing acquisition for PolyOne, which strengthens its global leadership in color/additive masterbatches with significant opportunities to create value beyond hard synergies via top-line synergies and innovation."