Evonik Takes Air Products Performance Materials

Confirming speculation that surfaced in March, German chemical producer Evonik has announced it will acquire the Specialty & Coating Additives business of US gases producer Air Products and Chemicals for $3.8 billion (€3.5 billion), subject to approvals from the relevant antitrust authorities. The business generated $1 billion in revenue and $241 million of adjusted EBITDA over the 12 months ending Mar. 31, 2016.

Under the terms of the agreement, operational facilities, supplier contracts, labs, contracts, customers, and employees, along with certain legal entities associated with the Air Products business will transfer to Evonik. The business’s headquarters will remain at Allentown, Pennsylvania, USA.

The Essen-based group said the deal, which it expects to complete by the end of 2016, will strengthen its already leading position in the high-margin specialty & coating additives market, add strength in North America and result in synergies of $80 million annually. The acquisition is also expected to be accretive to earnings per share in the 2017 business year. The combined specialty & coating additives business has annual sales of around €3.5 billion and an attractive EBITDA margin of more than 20%.

Describing the activities to be added as “highly complementary,” Evonik noted that they serve three “particularly attractive, rapidly growing” core markets: coating and adhesive additives, high-value PU foam additives and specialty surfactants for industrial and institutional cleaning. However, while targeting the same end-customers, they have different and complementary products.

Evonik claims leadership in PU foam stabilizers, while Air Products’ Specialty & Coating Additives business is well positioned in PU foam catalysts. The German chemical producer said demand for these products is rising strongly, and the market for the additives will grow far more quickly than overall demand for chemical products.   

The acquistion will also be a good geographical fit.The Air Products business is focused on North America and Asia, while Evonik is particularly strong in Europe. With the move, the German player said it is reducing its dependence on the European market and therefore better protecting its own business against economic fluctuations in individual regions.  

By optimizing production/logistics, marketing/sales and administration, Evonik said it expects to generate cost synergies of $60 million per year, starting in 2020 at the latest. Altogether, the deal is expected to generate annual synergies of $80 million.   

Evonik said it expects to receive net tax benefits of more than $500 million through the acquisition, which is partly structured as an asset deal. The German group plans to finance half the transaction with its own funds, the remainder with debt.