February 23, 2015 / 10:50 AM / 5 years ago

Asahi Kasei eyes electric car growth with $2.2 billion Polypore battery deal

TOKYO (Reuters) - Japanese chemical manufacturer Asahi Kasei Corp (3407.T) has agreed to buy Polypore International Inc’s PPO.N energy storage business for $2.2 billion, betting on growth in demand for hybrid and electric cars.

Both companies produce lithium-ion battery separators used in electronic gadgets and automobiles, but Asahi Kasei President Toshio Asano believes that the type produced by U.S.-based Polypore - known as dry process separators - will become the auto sector’s preferred option because of lower costs.

“We have been putting our resources in rechargeable batteries for personal computers and smart phones, but the next big market is electric and hybrid cars,” Asano told reporters on Monday.

Asahi Kasei will acquire all outstanding shares of Polypore for $60.50 a share, a 14 percent premium to their $52.95 close on Friday and representing an enterprise value of about $3.2 billion.

Polypore’s shares rose as high as $59.81 in morning trading on the New York Stock Exchange.

Before the acquisition, 3M Co (MMM.N) will buy the assets of Polypore’s separations media business for about $1 billion and Asahi Kasei will receive the cash proceeds from the sale. {ID:nBw9J4bP2a]

“With a high level of overlap with 3M’s existing business, we would expect the deal to generate synergies and to expand 3M’s presence in relatively fast-growing markets with high barriers to entry,” Sanford C. Bernstein analyst Steven Winoker wrote in a client note.

Polypore’s separation media business, which makes microporous membranes and filtration modules, will be merged with 3M’s purification business.

The U.S. company, known for its Post-It notes, said it expected Polypore’s business to add 4 cents per share to earnings, excluding one-time items, in the first year.

Polypore’s energy storage operation achieved sales of $442 million and EBITDA of $116 million in 2013, Asahi Kasei said.

Asked about possibility of further acquisitions, Asano said: “We would like to actively pursue (acquisitions) where there is a big strategic fit.”

Asahi Kasei said it would draw on its cash reserves and new bridging loans. Primary Executive Officer Hideki Kobori said the company was not considering issuing equity or bonds to finance the acquisition.

The transactions have been approved by the boards of directors of Asahi Kasei, 3M and Polypore.

Mitsubishi UFJ Morgan Stanley Securities Co was financial adviser to Asahi Kasei, while Bank of America Merrill Lynch advised Polypore. Centerview Partners LLC was 3M’s financial adviser.

Additional rporting by Chris Gallagher, Ritsuko Ando and Sagarika Jaisinghani; Editing by Anupama Dwivedi, David Goodman and Ted Kerr

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