Eastman To Aquire Solutia

vquestfilms.com · January 27, 2012

KINGSPORT, Tenn. & ST. LOUIS--(BUSINESS WIRE)-- Eastman Chemical Company (NYSE: EMN - News) and Solutia Inc. (NYSE: SOA - News) today announced that they have entered into a definitive agreement, under which Eastman will acquire Solutia, a global leader in performance materials and specialty chemicals. Under the terms of the agreement, Solutia stockholders will receive $22.00 in cash and 0.12 shares of Eastman common stock for each share of Solutia common stock. Based on yesterday’s closing prices, Solutia shareholders will receive cash and stock valued at $27.65 per Solutia common share, representing a premium of 42 percent and a total transaction value of approximately $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 specialty 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.

“This transaction is also expected to deliver immediate value to our stockholders in the form of accretion and strong cash generation, as well as create potential upside through the combination of two leading global chemical companies,” said Rogers.

“This complimentary transaction will accelerate the growth of our businesses around the world. The shared commitment to innovation, quality and technical service will allow us to better serve our customers and creates opportunity for our employees around the globe,” said Jeffry N. Quinn, chairman, president and chief executive officer of Solutia. “This transaction provides Solutia’s shareholders with immediate value and an attractive premium, as well as the opportunity to benefit from the future prospects of a leading global chemicals producer with the financial strength, a diversified mix of premium products, and the geographic footprint to capitalize on long-term growth opportunities.”

“I commend the excellent management team and employees of Solutia. Over the past several years, Solutia has transformed itself into a financially strong, innovative performance materials and specialty chemicals company, with enviable market leading positions in virtually every market it serves,” added Rogers. “That, in addition to both companies’ success integrating prior acquisitions, gives me confidence we will achieve a smooth transition. We look forward to welcoming Solutia employees to Eastman.”

Solutia a strong, strategic fit

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.

This acquisition is also a significant step in Eastman’s strategy to extend its global presence in emerging markets. In particular, it should significantly accelerate Eastman’s growth efforts and offer excellent 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 percent for the next several years.

Transaction expected to deliver strong earnings growth and significant cost and revenue synergies

Eastman expects the transaction to be immediately accretive to earnings, excluding acquisition-related costs and charges. After giving effect to the acquisition of Solutia, including expected cost synergies, Eastman expects 2012 EPS to be approximately $5 excluding acquisition-related costs and charges. Eastman is also increasing its 2013 EPS expectation to greater than $6.

Eastman has identified annual cost synergies of approximately $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 and other tax attributes that are expected to contribute to free cash flow (defined as cash from operations minus capital expenditures and dividends) of approximately $1.0 billion through 2013.

Eastman also recognizes the potential for meaningful revenue synergies by leveraging both companies’ technology and business capabilities and end-market overlaps, particularly in automotive and architectural.

Attractive capital structure, benefiting from low interest rate environment

Eastman intends to finance the cash portion of the purchase price through a combination of cash on hand and debt. Debt financing has been committed by Citi and Barclays Capital which are acting as financial advisors to Eastman on the transaction, and Jones Day is acting as legal counsel. Eastman’s management and Board of Directors remain committed to maintaining an investment grade credit rating and to its current annual dividend rate of $1.04 per share.

Deutsche Bank Securities Inc. and Moelis & Company LLC acted as financial advisors to Solutia on this transaction. Perella Weinberg Partners LP acted as financial advisors to Solutia's Board of Directors. In addition, the Valence Group, LLC conducted an independent evaluation of Solutia’s long range plan for Solutia’s Board of Directors. Kirkland & Ellis LLP acted as legal counsel to Solutia.

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.

TomTint · January 27, 2012

M@A transactions are ripe at the moment

Sisqouc · January 28, 2012

and 42% actually work out to the win win promised.

Lot of people tuning up their resumes.

Counterpart · January 30, 2012

Eastman intends to finance the cash portion of the purchase price through a combination of cash on hand and debt. Debt financing has been committed by Citi and Barclays Capital which are acting as financial advisors to Eastman on the transaction, and Jones Day is acting as legal counsel.

Since Martin Processing -> Courtaulds -> CPFilms Solutia, the window films operations had always been sold by the holding companies repeatedly because of the revenue and profitability, giving the window films business strong valuations.

Eastman is a global chemical powerhouse. If the window films business is not what they are after, diversifying CPFilms for a tidy pricetag will reduce the bulk of their debt exposure because of this acquisition.

Let's see if this day will come in the near future.

January 30, 2012

http://www.stltoday.com/business/local/solutia-s-global-sales-made-it-important-to-st-louis/article_8e11579e-492a-11e1-afbf-001a4bcf6878.html

Here is what the locals say.. Rob.. your supplier's been sold again.... in less than 2 years.

TomTint · January 30, 2012

It does make you wonder what value the new management will see in the window film component.

vquestfilms.com · January 30, 2012

http://www.stltoday....1a4bcf6878.html

Here is what the locals say.. Rob.. your supplier's been sold again.... in less than 2 years.

That was no surprise. They've been making aquisitions to position Solutia for a sale... they made that public information back when SOL bought Novomatrx. Hopefully StL benefits and doesn't get cut loose like the article hints at.

Counterpart · January 31, 2012

That was no surprise. They've been making aquisitions to position Solutia for a sale... they made that public information back when SOL bought Novomatrx.

The dealmakers got a good deal, not them. They didn't really get novamatrix cheap. Worse of all, they got to go on to swallow money-losing southwall, for what??? hahaha, is there anything so important from southwall that martinsville can't produce?

So there'll be lots of amortization in the years to come.

vquestfilms.com · January 31, 2012

That was no surprise. They've been making aquisitions to position Solutia for a sale... they made that public information back when SOL bought Novomatrx.

hahaha, is there anything so important from southwall that martinsville can't produce?

Yes, the patented VK technology products which they would primarily sell in the OEM markets. Southwall owned half of those patents... unless they got licensing or bought out Southwall SOL would not be able to produce those products.

Counterpart · February 1, 2012

That was no surprise. They've been making aquisitions to position Solutia for a sale... they made that public information back when SOL bought Novomatrx.

hahaha, is there anything so important from southwall that martinsville can't produce?

Yes, the patented VK technology products which they would primarily sell in the OEM markets. Southwall owned half of those patents... unless they got licensing or bought out Southwall SOL would not be able to produce those products.

BOA ruined their balance sheet after buying Merrill Lynch because of the lack of due diligence.

Let's hope the purchase of southwall was part of an overall plan, rather than an necessitated additional infusion after buying novo.