Trinseo has recently entered a binding agreement to acquire the PMMA (polymethyl methacrylates) and activated MMA (methyl methacrylates) businesses of Arkema.
Polymethyl methacrylates is a transparent & rigid plastic with several end-use applications. It is an adjacent chemistry that complements the existing offerings of the chemical materials solutions provider across multiple end markets such as consumer electronics, medical, building & construction, and automotive.
The acquisition is likely to generate annual pretax cost synergies of over $50 million by 2023, as well as additional revenue by leveraging the market overlap & additional revenue of Trinseo to drive growth. Additionally, the company, due to the harmonizing global ERP systems, will record a further $25 million in its IT-related productivity savings in the existing businesses.
Arkema’s PMMA business develops high-quality products & established brands like Oroglas®, Solarkote®, Altuglas®, and Plexiglas® as well as ensures the delivery of highly technical services & niche applications, robust customer relationships, and the growth of the primary market segments through innovation, enhanced customer relationships, and technical services.
As a part of the transaction, Trinseo will maintain a capital allocation approach to surge growth and its long-term value. The company is implementing a reduction of DPS (dividend per share) by $0.08 per quarter as well as suspending the share repurchase program to ensure financial flexibility.
Moreover, the transaction is anticipated to be funded with the existing cash of up to $250 million with the remainder from the new debt financing. Upon its closing, Trinseo is expecting its net leverage ratio in the mid-3x area, inclusive of the run-rate synergies. The company is also aiming towards targeted deleveraging in the mid-2x area by 2023. The deal, which is expected to be closed in mid-2021, is subject to several customary closing conditions & regulatory approvals.
Deutsche Bank Securities and HSBC Securities served as the lead financial advisors, Centerview Partners LLC as the strategic advisor, and Kirkland & Ellis as the primary legal advisor of Trinseo.