March 21, 2016 / 7:41 AM / 3 years ago

UK's Synthomer to buy U.S. adhesives & coatings firm for $226 million

(Reuters) - Chemicals maker Synthomer Plc (SYNTS.L) said it would buy U.S.-based Hexion Performance Adhesives & Coatings for $226 million, to grow its presence in the United States and Asia.

Synthomer, which supplies specialty emulsion polymers used in construction, textiles, paper and latex gloves, said it would fund the deal using both existing cash resources and additional credit facilities.

The acquisition, which is expected to complete this summer, will also add to Synthomer’s presence in the performance adhesives and coatings market, it said in a statement.

Synthomer said it expected to achieve about $12 million of annualized synergies by end 2018, with $21 million of estimated costs.

Morgan Stanley analysts expect Hexion PAC to add 3.2 million pounds to Synthomer’s net income, excluding synergies and restructuring costs.

A change in the company’s directors at the beginning of 2015 brought in to focus acquisitions as an engine of growth.

The analysts view the deal as the “first step” in Synthomer’s acquisition strategy, which will provide Chief Executive Calum MacLean an opportunity to show proof of concept to shareholders.

The analysts also expect more deals in due course as the company looks to add about 100 million pounds to earnings before interest, taxes, depreciation and amortization via acquisitions.

Synthomer said in a separate statement on Monday that it had agreed to sell its South African dispersions unit to Ferro S.A. for 13 million pounds, citing falling EBITDA and cash flows, need for ongoing investment and an increasingly challenging environment.

The company’s stock was up 4.65 percent at 342 pence at 0853 GMT on Monday on the London Stock Exchange.

Reporting by Noor Zainab Hussain in Bengaluru; Editing by Gopakumar Warrier and Sunil Nair

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