LANXESS and Advent to Acquire DSM’s Engineering Materials Division

Specialty chemicals company LANXESS and Advent International (“Advent”), a global private equity investor with a record in chemicals investings, are establishing a joint venture for high-performance engineering polymers.

Agreement Estimate

The two companies signed an agreement to acquire the DSM Engineering Materials business (DEM) from Dutch group Royal DSM , which will become part of the new joint venture. The purchase price is around EUR 3.7 billion and will be financed by the joint venture via equity from Advent and external debt.

Ronald Ayles, managing partner at Advent International says, “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. Together we plan to bring the experience, deep sector know-how, and financial resources to make the joint venture a global success story for everyone involved.

The combination of LANXESS’ High-Performance Materials (HPM) and DSM Engineering Materials (DEM) creates a strong platform and brings together extensive expertise, resulting in the best opportunities for employees and more value for customers,” adds Ayles.

Strengthening Position in Specialty Chemicals

This move further sharpens LANXESS’ business portfolio, which will consist of three specialty chemicals segments once the transaction is completed. LANXESS will use the proceeds of the transaction to reduce debt and to strengthen its balance sheet. In addition, the Group plans a share buy-back program with a volume of up to EUR 300 million.

LANXESS will have the possibility to divest its stake in the joint venture to Advent at the same valuation earliest after three years. EBITDA could then be significantly higher than today as Advent and LANXESS anticipate substantial synergies resulting from the combination of the two businesses.

LANXESS CEO Matthias Zachert says, “LANXESS will once again become significantly less dependent on economic fluctuations. In addition, we as LANXESS will strengthen our balance sheet with the proceeds from the transaction and gain new scope for the further development of our Group. With the new joint venture, we are forging a strong global player in the field of high-performance polymers.

The portfolios, value chains and global positioning of the two businesses complement each other perfectly. With its innovative products, the joint venture will be able to play a key role in shaping future developments – for example in the field of electromobility. In Advent, we have a strong and reliable partner with profound experience in the chemical industry and our customer industries,” adds Zachert.

Global setup and high backward compatibility

DSM’s Engineering Materials business comprises polyamides (PA6, PA66) as well as various specialty materials (PA46, PA410 and specialty polyesters as well as PPS). Around 2,100 employees work for the division at 8 production and 7 research sites in all relevant markets worldwide. In addition to Europe and the US, the business has a particularly strong presence in Asia.

LANXESS’ High-Performance Materials (HPM) business unit is one of the leading producers of PA6 and PBT engineering polymers and thermoplastic fiber composites. A total of 1,900 employees at 10 production and 7 research sites worldwide work for HPM. The global production network is characterized by a high degree of backward integration. The backbone is the Antwerp/Belgium site. There, HPM produces not only PA6 polymers but also relevant precursors such as caprolactam and glass fibers.

Sustainability Pioneers

Both DEM and HPM are pioneers in sustainability, offering bio- and recycled-based alternatives across their product portfolios.

For example, LANXESS recently launched a new high-performance polymer that is made from 92 percent sustainable raw materials. In producing the polymer, LANXESS uses “green” cyclohexane from sustainable sources such as rapeseed oil or other biomass as a raw material. It is reinforced with 60 percent by weight glass fibers recycled from industrial glass waste.

Focus Area of Joint Venture

The automotive industry is a focus customer sector for the new joint venture. There, the polymers are used, among other things, for lightweight elements in structural parts but also in the interior and often replace metal parts. In this way, weight can be saved, and CO2 emissions reduced. An important growth area is electromobility. Here, polymers are used, for example, in the construction of battery and charging systems, electronic control systems and power electronics.

In addition, the materials are used in the electrical and electronics industry, for example in components for smartphones, IT and household appliances.

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