Eastman Chemical Company
) has wrapped up its takeover of Missouri-based chemical company
) following the approval of the deal by Solutia's shareholders and
satisfaction of all regulatory and other conditions. With the deal
closure, Solutia has now become a wholly owned subsidiary of the
DU PONT (EI) DE (DD): Free Stock Analysis
DOW CHEMICAL (DOW): Free Stock Analysis Report
EASTMAN CHEM CO (EMN): Free Stock Analysis
SOLUTIA INC (SOA): Free Stock Analysis Report
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Pursuant to the terms of the cash and stock deal worth roughly $4.8
billion (including assumption of Solutia's debt), Solutia
stockholders will receive $22.00 in cash and 0.12 shares of Eastman
common stock for each Solutia share. Eastman issued 14,686,067
shares to Solutia shareholders in connection with the acquisition.
The company financed the cash portion of the purchase consideration
with cash on hand and debt.
Solutia, a global leader in performance materials and specialty
chemicals, registered around 30% of sales in 2011 from
Asia-Pacific. Eastman believes that the takeover will help it
expand its foothold in emerging markets including China. The
company expects the transaction to immediately add to its earnings
excluding acquisition related expenses.
Annual cost synergies are expected to be roughly $100 million by
2013. Moreover, Eastman expects to realize significant tax benefits
from the acquisition. It also recognizes the potential for
meaningful revenue synergies by leveraging technology and business
capabilities and overlapping end-markets, particularly in
automotive and architecture, of both companies.
With the completion of the Solutia deal, Eastman has realigned its
reporting segments. The company will report its third-quarter 2012
results under the new structure which has five reporting segments,
namely, Additives and Functional Products, Adhesives and
Plasticizers, Advanced Materials, Fibers, and Specialty Fluids and
Intermediates. Eastman has also announced certain changes in
executive leadership positions in conjunction with the
restructuring of its reporting segments.
Eastman's diversified chemical portfolio, along with its integrated
and diverse downstream businesses, is driving earnings. The company
benefits from business restructuring, increased capacity additions
and cost-cutting measures. It has sold unprofitable units and
closed down the poorly performing ones.
With the completion of the Solutia acquisition, Eastman now employs
roughly 13,500 people across the globe. The acquisition should
significantly accelerate the company's growth efforts and offer
lucrative opportunities in Asia Pacific. Eastman expects compound
annual growth rate in Asia Pacific to approach 10% over the next
Eastman, which competes with
The Dow Chemical Company
E. I. du Pont de Nemours and Company
), holds a short-term Zacks #2 Rank (Buy). We currently have a
long-term Outperform recommendation on the stock.