Lanxess to Expand Antimicrobial Business With $1.3 Billion Deal
(Bloomberg) -- Lanxess AG plans to buy the microbial control business from International Flavors & Fragrances Inc. for about $1.3 billion in its second-biggest purchase to date, adding chemicals that fight bacteria and mold in products from paint to water.
The purchase of the business with earnings before interest, tax, depreciation and amortization of about $100 million and revenue of 450 million is set to close in the second quarter next year, Lanxess said in a statement. The German chemical company said it can squeeze about $35 million in savings from the purchase, which will add to earnings in the first year after closing.
Lanxess has quickened the pace of acquisitions and the IFF unit marks the fourth deal this year. Chief Executive Officer Matthias Zachert has put the focus on areas like consumer protection as he advances the transformation of what was once a hodgepodge of chemical assets spun out of Bayer AG more than a decade ago
“In 2021, all signs are pointing to growth,” Zachert said in the release. “The business fits ideally into our strategic direction -- specialty chemicals with attractive margins, applications in a wide range of industries and with a global positioning.”
Lanxess rose as much as 70 cents, or 1.2%, to 58.36 euros. The stock has been among the worst performers on the 21-member Stoxx 600 Chemicals Index, losing 7.5% so far this year, while the index has returned 19%.
International Flavors & Fragrances put some assets up for sale after completing the $26 billion purchase of DuPont de Nemours Inc.’s nutrition and biosciences unit. The microbial unit is a former Dow Inc. business that was transferred to DuPont during the merger of those two companies.
The business employs about 270 people at two sites in the U.S. Antimicrobial agents are typically used to extend the lifespan of products like paints and coatings, detergents or household cleaners. They also preserve water and help functional textiles remain germ-free for longer.
Lanxess will finance the deal with debt and has secured bridge financing with a group of banks, it said. The Cologne-based company said it will review its capital allocation following the deal, and that it won’t continue its buyback program, which it has already suspended. The 1.1 million shares that Lanxess bought back will be canceled. it said.
Lanxess’s largest deal came in 2016, when it agreed to buy U.S. competitor Chemtura Corp. for about $2.1 billion in cash.
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