LANXESS last Monday announced plans to acquire US-based Chemtura Corporation, one of the major global providers of high-quality flame retardant and lubricant additives. With the largest acquisition in its history, LANXESS is building on its own additives portfolio and will become one of the world’s major actors in this growing market.

The companies have signed a definitive acquisition agreement. Under the terms of the agreement, Chemtura shareholders will receive USD 33.50 per share in cash for each outstanding share of common stock held. The transaction, with an enterprise value of approximately EUR 2.4 billion, is expected to close around mid-2017, and is subject to approval by Chemtura shareholders, required regulatory approvals and certain other customary closing conditions.

Headquartered in Philadelphia, Pennsylvania, Chemtura has 20 sites in 11 countries and approximately 2,500 employees worldwide. The company reported sales of around EUR 1.5 billion in the last four quarters with EBITDA pre exceptionals of approximately EUR 245 million (EBITDA margin of approx. 16%). Approximately 45% of Chemtura’s revenue is generated in North America. In addition to additives, Chemtura’s portfolio includes urethanes and organometallics.

“With this acquisition, we are forming a champion in the field of additives and are strengthening our already profitable portfolio,” said Matthias Zachert, Chairman of the Board of Management of LANXESS AG. “Through the acquisition, we are further implementing our strategy to become a more resilient and profitable chemical company. We are significantly building on our competitive positioning in medium-sized markets and increasing our presence in North America. LANXESS is taking a next and major step forward on its growth path.”

“The transaction provides premium value to our shareholders and benefits our customers and employees by making Chemtura part of a much larger, stronger global enterprise with the resources to fully support a more diverse suite of specialty chemicals products and services,” said Craig A. Rogerson, President, Chief Executive Officer and Chairman of the Board of Chemtura.

Chemtura’s two additive segments form the main pillars of the company’s business. Both will, together with LANXESS’ Rhein Chemie Additives business unit (ADD), form the new Performance Additives segment after the closing of the transaction. ADD already offers a wide range of specialty additives and service products for the plastics, rubber, lubricants and colorants production, and employs around 1,600 employees worldwide at more than 20 locations.

“Additives is a very attractive business field in specialty chemicals. In addition to their relatively low capital intensity, they require strong expertise and enable customized solutions. In this area, both Chemtura and LANXESS have long-standing expertise,“ said Anno Borkowsky, head of the LANXESS business unit Rhein Chemie Additives.

The first pillar of Chemtura’s additives business includes lubricant additives and synthetic lubricants for industrial applications, such as in power generation and aviation. “Chemtura holds a competitive position in industrial lubricant additives. Moreover, Chemtura manufactures the necessary precursors and intermediates. Combined with our own additives portfolio, we will be a major supplier for industrial lubricants and will further strengthen our competitiveness through our integrated value chain,” explained Borkowsky. LANXESS expects the industrial lubricant additives market to grow at an annual rate of three to four percent in the medium term, primarily driven by steadily increasing requirements with respect to the performance and environmental sustainability of lubricants.

The second pillar is mainly comprised of the brominated flame retardant additives, elemental bromine and further bromine derivatives businesses. Brominated flame retardant additives are used because of their high effectiveness, especially in the construction industry for insulation and in the electronics industry. Chemtura is a major supplier of bromine and brominated products and is well positioned due to its backward integration. “Flame retardant requirements continue to rise mainly due to the trend for energy-efficient construction,” said Borkowsky, adding: “With this acquisition, we will become a major global supplier of high performance flame retardant additives. In the future, we can offer our customers brominated and phosphorous-based products from one source.” Rhein Chemie Additives already has a competitive position in the phosphorous-based flame retardants business and features a backward integrated value chain. LANXESS also expects medium-term growth rates of three to four percent per year in the field of flame-retardant additives.