Shares of specialty chemicals and advanced materials company
Rockwood Holdings, Inc.
) screamed higher to reach a new high after chemicals maker
) agreed to buy it in a cash and stock deal worth $6.2 billion.
The move underscores both companies' efforts to shore up growth by
creating a premier specialty chemicals company with leading market
position in a host of high-margin businesses including lithium,
surface treatment and refinery catalysts.
Rockwood's shares shot up as much as 13.8% to touch a new 52-week
high of $86.18 yesterday. The stock retraced to end the day at
$83.14, gaining around 9.8%. The New Jersey-based company's shares
are up around 17% so far this year versus a 7.9% gain for the
Rockwood is the world's top producer of lithium and lithium
compounds, a major component of lithium-ion batteries used in
electric cars, laptops and smartphones, among others. It had been
actively involved in disposing its non-core businesses to become a
more focused specialty chemical company.
Rockwood has sold its advanced ceramics business - CeramTec - to
private equity firm Cinven for €1.49 billion (roughly $2 billion)
and its clay based additives business to Germany-based ALTANA Group
for $635 million. It is also selling its Performance Additives and
Titanium Dioxide (TiO2) businesses to
) for $1.1 billion.
Under the deal terms, Albemarle will pay $50.65 in cash and 0.4803
of a share of its stock for each outstanding Rockwood share. The
deal values Rockwood at $85.53 per share, representing a 13%
premium to its closing price on Jul 14. Albemarle has secured
committed financing from BofA Merrill Lynch - a unit of
Bank of America Corp.
) - to fund the cash portion of the deal.
The deal has received the green light from the boards of both
companies and is subject to shareholder and regulatory clearances
and other closing conditions. Following the closure of the
transaction (expected in first-quarter 2015), Albemarle's
shareholders will own roughly 70% of the merged company with
Rockwood shareholders holding the balance.
Albemarle's CEO Luke Kissam will be the President and CEO of the
integrated company which will operate under the "Albemarle" banner.
BofA Merrill Lynch is serving as financial advisor to Albemarle
while Lazard and Citi are acting as financial advisors to Rockwood.
The deal brings together two leading specialty chemicals makers
with strong market positions and complimentary product portfolios.
The combined company will have greater customer reach, enhanced
diversity across end markets, technologies and geographies.
Moreover, the integrated company will gain from access to low-cost
raw material and highly specialized production assets.
The combined entity will be well placed to drive earnings growth by
expanding the reach of lithium-based energy storage products
including batteries for the automotive industry, leveraging
attractive trends in refinery catalysts including rising demand for
transportation fuels, expanding in the bromine markets through new
applications and capitalizing on its leading position in surface
Albemarle expects the acquisition to be accretive to its cash
earnings per share in the first year and adjusted earnings per
share in the second year. Moreover, it expects around $100 million
in cost synergies by 2016.
Rockwood currently retains a Zacks Rank #3 (Hold) while Albemarle
is a Zacks Rank #4 (Sell) stock.
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