Under the terms of the agreement, Solutia stockholders will receive USD 22.00 in cash and 0.12 shares of Eastman common stock for each share of Solutia common stock. Based on the closing prices from 26 January 2012, Solutia shareholders will receive cash and stock valued at USD 27.65 per Solutia common share, representing a premium of 42 % and a total transaction value of approximately USD 4.7 billion, including the assumption of Solutia's debt.
"The acquisition of Solutia is a significant step in our growth strategy and one that I am confident will strengthen Eastman as a top-tier speciality chemical company with strong, stable margins, said Jim Rogers, Chairman and Chief Executive Officer of Eastman. "The addition of Solutia will broaden our geographic reach into emerging geographies, particularly Asia Pacific, establish a powerful combined platform with extensive organic growth opportunities, and expand our portfolio of sustainable products, all of which are consistent with our growth strategy.
Eastman and Solutia share several key fundamentals, such as complementary technologies and business capabilities, a polymer science backbone, similar operating philosophies and a high performance culture. In addition, the overlap of key end-markets is expected to provide opportunities for growth.
According to the companies, this acquisition is also a significant step in Eastman's strategy to extend its global presence in emerging markets. In particular, it should accelerate Eastman's growth efforts and offer growth opportunities in Asia Pacific. By leveraging infrastructure in the region, Eastman expects to have a compound annual growth rate in Asia Pacific approaching 10 % for the next several years.
Eastman says it has identified annual cost synergies of approximately USD 100 million that are expected to be achieved by year-end 2013. Key areas of value creation include the reduction of corporate costs, raw material synergies, and improved manufacturing and supply chain processes. Further, Eastman expects to realize significant tax benefits from Solutia's historical net operating losses.
The transaction, which was approved by the Boards of Directors of both companies, remains subject to approval by Solutia's shareholders and receipt of required regulatory approvals as well as other customary closing conditions. The transaction is expected to close in mid-2012.