German giant BASF SE has entered a 1.6 billion euro ($1.9 billion) deal to buy Solvay SA’s nylon business, the two chemical companies announced Sept. 19.
Phil Karig, managing director with the Mathelin Bay LLC consulting firm in St. Louis, said the transaction "looks like a win-win deal for both the buyer and the seller." "At the heart of this deal is the fact that a product line that one company considers to be a commodity — or at least not a specialty — can be considered more of a specialty — or at least an engineering resin — by another company." he said in an email.
Karig added that, from Solvay's perspective, the company is moving away from nylon, an engineering resin that has a large number of commodity applications such as fiber. At the same time, he explained, Solvay is reserving the right to source nylon later to produce nylon compounds that are more specialty grades.
BASF, according to Karig, is "enlarging its portfolio of engineering resins that they view as 'specialty enough' to continue inve-sting in." Another longtime market watcher told Plastics News that "it looks like the [Solvay nylon] business has found a good home, with a new owner who has a long term vision and the resources to succeed." The move, which is part of Solvay’s tran-sformation strategy to become a “multi-specialty” chemical company, the Brussels-based company said. According to BASF, the acquisition is expected to improve the net financial position of the group by about 1.3 billions euros ($1.55 billion).
The business unit will complement BASF’s engineering plastics portfolio as it will be integrated into the performance materials and monomers divisions, according to Ludwigshafen, Germany-based BASF. In terms of regions, BASF said the transaction would enhance its access to key growth markets in Asia and South America. The former Solvay unit will also strengthen BAS-F’s nylon 6/6 value chain as it will increase polymerization capacities and the backward integration into the key raw material adipodinitrile (ADN).
For the full year 2016, net sales of the business to be purchased from Solvay amounted to 1.315 billion euros ($1.57 billion) and earnings before interest, tax, depreciation and amortization (EBITDA) around 200 million euros ($239 million). The unit has employs nearly 2,400 globally, of which approximately 1,300 are based in France. Worldwide, it operates 12 production sites, four research locations and 10 technical support centers. The business would be integrated into BASF’s performance materials and monomers divisions.
"Solvay's planned divestment of polyamides marks a tipping point in the profound transformation journey we began four years ago. Successful completion of this transaction will further reinforce Solvay as a multi-specialty chemical group, delivering sup-erior growth and sustainable value," said Jean-Pierre Clamadieu, CEO of Solvay. The execution of definitive agreements is expected in the coming months following consultation with the relevant social bodies.
The two companies said they aimed to close the transaction in the third quarter of 2018, after receiving regulatory approvals.
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