Synthomer acquires Hexion Performance Adhesives & Coatings

Synthomer, a leading speciality chemicals company, has announced the acquisition of Hexion Performance Adhesives & Coatings, a business of Hexion Inc, a global chemical company based in Columbus, Ohio, USA. The total consideration is US$226M (£156M), which is being funded from both existing cash resources and utilisation of additional credit facilities. The acquisition is expected to complete during the summer 2016 following receipt of regulatory approvals and satisfaction of other closing conditions.

Hexion PAC develops, manufactures and markets a wide array of dispersions, additives, powder coatings and speciality monomers, supplying a global customer base across a broad range of end-use including coatings, adhesives and for building and construction applications. The business employs approximately 750 employees and operates seven sites across Europe, the USA and Asia. In the year to December 31, 2015, Hexion PAC, generated sales of US$370M and EBITDA of US$30M. At December 31, 2015, Hexion PAC had gross assets of US$149M. It is expected that the acquisition will be earnings enhancing for Synthomer in the first full year. The existing leadership team of Hexion PAC will transfer with the business to Synthomer.

The acquisition of Hexion PAC significantly strengthens Synthomer’s position in the performance adhesives and coatings market, offering access to new product technologies, customers and markets. Hexion PAC is also highly complementary to Synthomer’s existing business both geographically and in the markets in which it operates. Following completion, the Group will have a stronger platform from which to continue its growth aspirations in the Speciality Coatings market. Synthomer expects to achieve approximately US$12M of annualised synergies by end 2018 through the integration of Hexion PAC’s businesses into the Group. The estimated costs to achieve the synergies are US$9m of restructuring costs and US$12M of capital costs.

The purchase price represents a pre-synergy multiple of 7.5x and a post-synergy multiple of 5.4x and the Group’s pro-forma leverage will increase to approximately 1.5x based on the Group’s 2015 year-end numbers.

Calum MacLean, CEO of Synthomer, said: "The acquisition of Hexion PAC represents a further step forward in our strategy to continue to grow and develop the business. This acquisition strengthens our platform for continued growth in the global dispersions and additives market, and in particular expands our presence in the USA and Asia. Hexion PAC has a good performance track record and shares our commitment to innovation and emphasis on strong customer relationships. We look forward to welcoming our new colleagues and integrating the business with Synthomer through the remainder of this year.”