Acquisition Lanxess, Advent to Create New Global JV for High-Performance Engineering Polymers

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Lanxess and Advent have plans to acquire the Engineering Materials Business from DSM for 4 billion dollars which is expected to be a part of the new joint venture. Lanxess will also contribute its High-Performance Materials business unit to the joint venture and receive a payment of at least 1.18 billion dollars as well as a stake of up to 40 % in the joint venture.

Cologne/Germany – Lanxess and Advent International (Advent) are establishing a joint venture for high-performance engineering polymers. The two companies recently signed an agreement to acquire the DSM Engineering Materials business (DEM) from Dutch group Royal DSM, which will become part of the new joint venture. The purchase price is around 4 billion dollars and will be financed by the joint venture via equity from Advent and external debt. The business represents sales of around 1.6 billion dollars with an Ebitda margin of approximately 20 percent.

In addition, Lanxess will contribute its High-Performance Materials (HPM) business unit to the joint venture. HPM is one of the leading suppliers of high-performance polymers, which are used primarily in the automotive industry. The business represents annual sales of around 1.6 billion dollars with Ebitda pre exceptionals of around 225 million dollars. Advent will hold at least 60 percent in the joint venture. Lanxess will receive an initial payment of at least 1.18 billion and a stake of up to 40 percent in the future joint venture. Following the transfer to the joint venture, the HPM business will no longer be fully consolidated at Lanxess, but will be included in the consolidated financial statements at equity.

This move further sharpens Lanxess’ business portfolio, which will consist of three specialty chemicals segments once the transaction is completed. Lanxess will use the proceeds of the transaction to reduce debt and to strengthen its balance sheet. In addition, the Group plans a share buy-back program with a volume of up to 322 million dollars.

Lanxess will have the possibility to divest its stake in the joint venture to Advent at the same valuation earliest after three years. Ebitda could then be significantly higher than today as Advent and Lanxess anticipate substantial synergies resulting from the combination of the two businesses.

The transaction is still subject to approval by the authorities. Closing is expected in the first half of 2023.

Lanxess CEO Matthias Zachert: “Lanxess will once again become significantly less dependent on economic fluctuations. In addition, we as Lanxess will strengthen our balance sheet with the proceeds from the transaction and gain new scope for the further development of our Group. With the new joint venture, we are forging a strong global player in the field of high-performance polymers. The portfolios, value chains and global positioning of the two businesses complement each other perfectly. With its innovative products, the joint venture will be able to play a key role in shaping future developments - for example in the field of electromobility. In Advent, we have a strong and reliable partner with profound experience in the chemical industry and our customer industries.”

Ronald Ayles, Managing Partner at Advent International: “Joining forces with Lanxess in this industry transforming transaction is a highlight for Advent as we have built a trusted, long-standing relationship and share the highest mutual respect. Together we plan to bring the experience, deep sector know-how, and financial resources to make the joint venture a global success story for everyone involved. The combination of Lanxess’ High-Performance Materials (HPM) and DSM Engineering Materials (DEM) creates a strong platform and brings together extensive expertise, resulting in the best opportunities for employees and more value for customers.”

Future-oriented applications

The automotive industry is a focus customer sector for the new joint venture. There, the polymers are used, among other things, for lightweight elements in structural parts but also in the interior and often replace metal parts. In this way, weight can be saved and CO2 emissions reduced. An important growth area is electromobility. Here, polymers are used, for example, in the construction of battery and charging systems, electronic control systems and power electronics.

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