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Chemical Deals

Eastman to acquire Taminco

Eastman Chemical announced today that it plans to acquire Taminco for $2.8 billion, or $26/share, including $1 billion of assumed debt. Taminco, a major producer of alklylamines and alkylamine derivatives, was taken public by private equity firm Apollo Management (New York) in 2013. While Apollo sold shares in Taminco in two phases, the firm retains a majority stake in the company, and it was the only shareholder needed to vote in favor of the deal. The acquisition is expected to close in the fourth quarter.

For Eastman, the deal strengthens the company’s business in the food, animal nutrition, and agriculture markets, where Taminco’s alklyamines technology is widely used, Eastman says. The deal also strengthens Eastman’s position in personal care, coatings, and oil and gas, the company says.

Eastman says the deal will be accretive to 2015 earnings by at least 35 cts/share, and to 2016 earnings by 60 cts/share. The company also expects synergies, mostly from cost-cutting in corporate functions and operations, to total about 5% of Taminco’s 2013 revenue, or $60 million, over two years.

Taminco “believes it is the world’s largest integrated producer of alkylamines and alkylamine derivatives,” the company said in its most recent annual report. The company has seven production facilities and operates in 19 countries, with an installed capacity of 1.27 million m.t. About 90% of Taminco’s sales volumes in 2013 went into the agriculture, water treatment, home and personal care, animal nutrition, and oil and gas end markets, the report says, and the company believes it has number-one or number-two positions in “the vast majority” of the chemicals it makes. Taminco reported revenues of $1.2 billion and adjusted Ebitda of $255 million for the year ended 31 December 2013, along with a net loss of $7 million.

The merger agreement includes a 30-day “go-shop” period, during which Taminco and financial adviser Morgan Stanley (New York) will solicit superior proposals. Taminco is permitted to enter into negotiations with a bidder whose proposal is deemed superior during that period, and during a 15-day period thereafter. It was not immediately clear if a superior proposal will result from the “go-shop” period, nor was it clear if Tamnico must pay a break-up fee to Eastman if it terminates the merger agreement during the period.
“As a specialty chemical company with consistent earnings growth and leading positions in attractive niche end markets, Taminco is a strong fit with Eastman’s strategic focus. Taminco will add an attractive alkylamines stream to our chemical portfolio,” says Eastman chairman and CEO Mark Costa.

Taminco has shuffled through multiple owners in recent years. Apollo acquired the company from fellow private equity firm CVC Capital Partners (London) in early 2012, selling off a minority stake in the company in an IPO just over a year later. In late 2013, Apollo sold off additional shares in the company, bringing its stake down to the current 53.8%. The company also made an acquisition, buying Kemira’s formic acid business for $191.5 million in January.

Taminco shares shot up to around $26.50/share, from around $24, in trading immediately following the announcement. Eastman shares also rose this morning, from around $83.50/share, to above $84. Citi (New York) and Jones Day (Cleveland) acted as legal and financial advisers, respectively, to Eastman. Taminco's legal adviser was Kirkland & Ellis (Chicago).