Industrial Automation Magazine India

LANXESS and Advent International establish JV for high-performance engineering polymers

Published on : Thursday 02-06-2022

LANXESS and Advent to acquire Engineering Materials business from DSM for a purchase price of around EUR 3.7 billion.

Mumbai, May 31, 2022 – Specialty chemicals company LANXESS and Advent International, one of the largest and most experienced global private equity investors with a well established track record in chemicals investings, are establishing a joint venture for high-performance engineering polymers. The two companies today 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. The business represents sales of around EUR 1.5 billion with an EBITDA margin of approximately 20 percent. DEM is one of the leading global suppliers in high-performance specialty materials that address key market needs in electronics, electrical and consumer goods.

In addition, LANXESS will contribute its High Performance Materials (HPM) business unit to the joint venture. HPM is one of the leading suppliers of high-performance polymers, which are used primarily in the automotive industry. The business represents annual sales of around EUR 1.5 billion with EBITDA pre exceptionals of around EUR 210 million. Advent will hold at least 60 percent in the joint venture. LANXESS will receive an initial payment of at least EUR 1.1 billion and a stake of up to 40 percent in the future joint venture. Following the transfer to the joint venture, the HPM business will no longer be fully consolidated at LANXESS but will be included in the consolidated financial statements at equity.

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.

The transaction is still subject to approval by the authorities. Closing is expected in the first half of 2023.