3.7 billion euros! LANXESS and Adventist Capital to acquire DSM's engineered materials business

May 29, 2024, 11:58 AM

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Highlights at a glance

Lanxess and Advent International have formed a joint venture to produce high-performance engineering polymers, acquiring Royal DSM's DSM Engineered Materials for approximately €3.7 billion. This venture integrates Lanxess's High Performance Materials business, enhancing their market position and driving synergies. The transaction, pending regulatory approval, is expected to close in early 2023.

Lanxess, a specialty chemicals company, and Advent International, one of the world's largest and most experienced private equity investors with a proven track record in chemical investments, are forming a joint venture to produce high-performance engineering polymers.

The two companies signed an agreement on June 1 to acquire Royal DSM's DSM Engineered Materials business (DEM), which will be incorporated into the new joint venture. The purchase price of the transaction is approximately 3.7 billion euros and will be financed by the joint venture through Advent's equity and foreign debt. DEM has sales of around 1.5 billion euros and an EBITDA margin of around 20 percent. DEM is one of the world's leading suppliers of high-performance specialty materials that meet the critical needs of the electrical and electronic and consumer goods markets.

It is worth mentioning that, according to a report by PR Newswire on May 31, DSM and Firmenich announced that they have reached a business combination agreement and become a partner in the fields of nutrition, beauty and wellness. DSM-Firmenich An expanding industry direction will be a strong entry into the nutrition, health, beauty and beauty industries. Firmenich's unique leading fragrance and taste business will be combined with DSM's exceptional line of health and nutrition products.

In addition, LANXESS will incorporate its High Performance Materials (HPM) business unit into the joint venture. HPM is one of the leading suppliers of high-performance polymers for the automotive industry. HPM's annual sales are around 1.5 billion euros and EBITDA in the regular business area is around 210 million euros.

Advent Capital will hold at least 60% of the joint venture. LANXESS will receive an initial payment of at least 1.1 billion euros and will have up to 40 percent of the joint venture in the future. After the transfer into the joint venture, HPM's business will no longer be fully consolidated into LANXESS, but will be included in the consolidated financial statements on an equity basis.

The move will further improve LANXESS' business portfolio. Upon completion of the transaction, LANXESS will consist of three specialty chemicals business segments. LANXESS will use the transaction proceeds to reduce debt and strengthen its balance sheet. In addition, the group plans to implement a share repurchase program of up to 300 million euros.

LANXESS could divest its stake in the joint venture to Adventist Capital as early as three years later at the same valuation. EBITDA is likely to be much higher than current levels by then, as Avon Capital and Lanxess expect significant synergies from the partnership.

The transaction, which is still subject to regulatory approvals, is expected to close in the first half of 2023.

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