LANXESS and Dutch company Royal DSM N.V. have reached an agreement in principle involving the sale of DSM Elastomers to LANXESS for EUR 310 million on a cash and debt-free basis. DSM Elastomers produces the synthetic rubber ethylene propylene diene monomer (EPDM) under the brand name Keltan.
The price for the DSM Elastomers business represents an EBITDA multiple of roughly 6 based on the expected EBITDA of 2010. The acquisition will be financed by LANXESS out of existing liquidity and is expected to be EPS accretive as of 2011.
The transaction contracts will be finalized once a consultation process with the employees´ representatives of DSM in the Netherlands has been completed. The transaction is subject to approval from antitrust authorities. Closing is expected in the first months of 2011.
"We look forward to welcoming DSM's professional EPDM team as well as its impressive assets to our core synthetic rubber activities, said Axel C. Heitmann, LANXESS CEO. "The transaction will also be an important step towards our goal of achieving roughly EUR 1.4 billion EBITDA pre exceptionals in 2015.
Important step towards mid-term earnings target Feike Sijbesma, CEO/Chairman of the DSM Managing Board, said: "The sale of DSM Elastomers completes our Vision 2010 strategy to become a focused Life Sciences and Materials Sciences company. This transformation has been achieved within our desired timeframe and at favorable conditions for our shareholders and employees. DSM has now entered a new era focused on driving growth and returns with enhanced earnings quality and confidence in meeting our medium-term targets.
Future EPDM headquarters to be located in Sittard-Geleen, NL Sittard-Geleen-based DSM Elastomers has approximately 420 employees worldwide and is expected to achieve sales of about EUR 380 million in 2010. DSM operates an EPDM plant in Sittard-Geleen, the Netherlands, with an annual production capacity of 160,000 metric tons. DSM's other EPDM plant is based in Triunfo, Brazil, with an annual capacity of 40,000 metric tons. LANXESS plans to base the headquarters of the combined EPDM businesses in Sittard-Geleen.
LANXESS' Technical Rubber Products business unit (TRP), headed by Guenther Weymans, sells EPDM under the brand name Buna EP. LANXESS produces EPDM in Marl, Germany, and Orange, United States, with a combined annual capacity of 120,000 metric tons.
The global rubber market for EPDM is expected to show single-digit percentage growth per annum in the next ten years, driven by rising demand in China and Brazil.
LANXESS to strengthen production technology for EPDM Through the transaction, LANXESS plans to strengthen its technology base by gaining access to the ACE technology. DSM is in the process of implementing this technology on a larger scale at its site in Sittard-Geleen. In comparison to conventional technology, ACE reduces the energy and production costs for EPDM and at the same time broadens the application possibilities of the rubber. LANXESS will evaluate implementing ACE technology into its existing plants.
"Our customers will benefit from a wider range of premium EPDM products, said Werner Breuers, LANXESS Board Member.
EPDM is used above all in the automobile industry but also in the plastics modification, cable and wire, construction and oil additives industries. Its properties include very low density, good resistance to heat, oxidation, chemicals and weathering as well as good electrical insulation properties.
Additional products in TRP's portfolio include Polychloroprene rubber (CR), Hydrogenated nitrile rubber (HNBR), Ethylene vinyl acetate rubbers (EVM) and Nitrile Rubber (NBR). TRP is part of LANXESS' Performance Polymers segment, which recorded sales of EUR 2.4 billion in 2009. Apart from Marl and Orange, the business unit has production sites in Leverkusen, Dormagen (both Germany) and La Wantzenau (France). The business unit has roughly 1,000 employees.