UK company Synthomer is to sell its Pyratex VP Latex business in Germany to materials firm Trinseo, ahead of its purchase of Omnova, a US-based specialty chemical company which manufactures emulsion polymers, speciality chemicals and decorative products. Completion of the divestment to Trinseo, which represents less than 0.5% of Synthomer 2019 sales, is subject to approval from competition authorities but it says this does not impact the completion of the Omnova transaction.
The transaction creates a global speciality chemicals company with significant scale and a robust platform from which to invest in future growth. Synthomer becomes a major world-wide player in water-based polymer solutions with greater customer reach and strong operational capabilities and will be in an excellent position to invest in growth, innovation, and people.
The acquisition materially strengthens Synthomer’s presence in North America, as well as increases its presence in Europe and Asia, including further penetration into the high growth Chinese market. Synthomer intends to utilise best practices from across the enlarged Group to improve productivity and reduce costs.
Since announcing the transaction in July 2019, Synthomer says it has done as much as possible before completion with strong cooperation between respective teams meaning that it is ready to move forwards on integration whilst mindful of the current environment. As previously announced, and confirmed today, the acquisition is expected to result in estimated recurring pre-tax cost synergies of US$29.6 million per annum following completion.
In terms of its financial results, Synthomer says it has experienced a solid start to the year with trading in line with 2019 and expectations set out at the time of Synthomer’s FY results. Demand has been especially strong in its nitrile latex business.
Whilst the impact on both production and demand from COVID-19 has been limited to date, the ongoing spread of the virus clearly presents significant uncertainty, it adds.
Also as announced, the group is well advanced on plans to realise further efficiencies across the business and with raw material prices falling, working capital will reduce this year. Furthermore, with additional capacity at its plants in Asia and Europe now onstream, capital expenditure will be much lower than 2019.
Commenting, Calum MacLean, CEO of Synthomer said: “It is very exciting to have reached this point, a transformational moment in Synthomer’s history. Synthomer now has global reach, a broader product portfolio and increased R&D capabilities with an exciting platform from which to attract talent and invest in future growth. We have a clear integration plan for bringing the two businesses together, which will in turn enable us to deliver significant synergies. Clearly these are uncertain times but our significant liquidity headroom, ongoing efficiency programme and increased focus on ways to preserve cash, ensure that Synthomer and its highly experienced team is fully equipped to manage the current environment.”