July 29, 2015 / 5:23 AM / 4 years ago

Belgium's Solvay to buy U.S. peer Cytec for $5.5 billion

BRUSSELS (Reuters) - Belgian chemical group Solvay (SOLB.BR) has agreed to buy U.S. peer Cytec CYT.N for $5.5 billion, giving it a bigger presence in the lightweight materials business where demand from the aerospace industry is booming.

A woman walks past the statue of Ernest Solvay, the founder of Belgian drug and chemicals maker Solvay, outside the company's headquarters in Brussels February 16, 2012. REUTERS/Yves Herman

Solvay said in a statement on Wednesday it would pay $75.25 per share for Cytec, which closed at $58.39 on Tuesday.

The Belgian group will finance the transaction with a 1.5 billion euros ($1.66 billion) rights issue, 1.0 billion euros of hybrid debt and a senior debt issue.

Solvay Chief Executive Jean-Pierre Clamadieu said the acquisition was justified by Cytec’s growth potential in aerospace markets.

“The composite market in the aerospace sector is growing by about 10 percent per year,” he told a conference call. “We are confident Cytec is well positioned to benefit from this growth.”

The Belgian company said the enterprise value, which includes debt, was $6.4 billion, representing a 2015 estimated core profit (EBITDA) multiple of 14.7 times and of 11.7 times when considering potential benefits.

Solvay expects to make annual savings of 100 million euros.

“We consider the acquisition to be a reasonably good fit but consider the price fairly high,” KBC Securities wrote in a note.

Solvay shares were 0.9 percent down at 126.85 euros by 0710 GMT, making them among the weaker performers in the FTSEurofirst 300 index .FTEU3 of leading European stocks.

Solvay has previously said it would focus on acquisitions in North America because of lower energy costs. Cytec makes most of its $2 billion in annual sales there.

It makes composite and adhesive materials for the aerospace and automotive industries and chemicals used in the mining sector for mineral processing and solvent extraction. Solvay already makes chemicals for use in oil and gas extraction.

Clamadieu said he believed the group would secure the necessary regulatory approval on both sides of the Atlantic to close the deal. Solvay expects it will close in the fourth quarter.

The company said that its and Cytec’s boards of directors had unanimously recommended the offer and that its largest shareholder, Solvac (SOAC.BR) with a 30 percent stake, was behind the deal.

Solvay also announced its second quarter results on Wednesday. Core profit, adjusted for one-off items rose 8.1 percent in the second quarter to 500 million euros, in line with the 499 million expected in a Reuters poll of seven analysts.

The company said its speciality materials and chemicals businesses gained, but demand declined substantially for chemicals used in the oil and gas sector.

Reporting by Robert-Jan Bartunek; editing by Philip Blenkinsop and Jane Merriman

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