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Covestro to acquire DSM resins, functional materials businesses for USD1.9 billion

September 30/2020

MOSCOW (MRC) -- DSM says it has reached an agreement to sell its resins and functional materials, and associated businesses, including DSM Niaga, DSM additive manufacturing, and the coatings activities of the DSM advanced solar business, to Covestro for an equity value of EUR1.6 billion (USD1.9 billion), said Chemweek.

Completion of the transaction is expected in first half 2021, subject to customary conditions and approvals.  The businesses included in the transaction represented EUR1.01 billion of DSMs 2019 total annual net sales and EUR133 million of DSMs 2019 total EBITDA, the company says. DSM will provide re-stated figures for its materials cluster ahead of its third-quarter results, it says.

Meanwhile, DSM anticipates a book profit on the transaction to be recognized on closing. It expects to receive approximately 1.4 billion net in cash following closing, including repayment of the net debt of the businesses being sold to Covestro, and after transaction costs and capital gains tax.

This sale builds on our approach of actively managing our businesses, as DSM continues to evolve as a purpose-led, science-based company operating in the fields of nutrition, health, and sustainable living. The deal delivers strong value to DSM and is strategically attractive for all parties, say Geraldine Matchett and Dimitri de Vreeze, co-CEOs of DSM.

Covestro says that the acquisition creates one of the leading suppliers in the field of sustainable coating resins. The integration of DSMs resins and functional materials businesses is a substantial opportunity to expand annual revenue at Covestros coatings, adhesives, and specialties segment by more than 40% to about EUR3.4 billion, on a 2019 pro-forma basis, Covestro says. The company expects permanent synergy effects to build up to about EUR120 million on an annualized basis from full integration by 2025.

This acquisition is an important step for our corporate strategy. [It] enhances the growth trajectory of our business. By combining our strong innovation capabilities, sustainable product portfolios, as well as complementary technologies and customer industries, we will unlock significant value. At the same time, it is also a key step to drive innovation for the transition towards a circular economy, says Markus Steilemann, CEO of Covestro.

Covestro says the transaction will be financed with a combination of equity, debt instruments, and own cash generation, consistent with the companys commitment to maintaining a solid investment-grade rating. For this purpose, Covestro is planning to utilize its existing, authorized share capital for an equity issuance to raise approximately EUR450 million, it says.

According to MRC's ScanPlast, in Russia, following the results of the first two quarters, the total estimated consumption of PC granulate in the Russian Federation (excluding imports and exports to Belarus) amounted to 47.3 thousand tonnes against 40.7 thousand tonnes in 2019. Total demand increased by 16%.
Author:Anna Larionova
Tags:petrochemistry, construction, Covestro, DSM.
Category:General News
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