Eastman Chemical Inks $800M Deal for Sale of Tire Additives Business

Specialty chemicals provider, Eastman Chemical Company (EMN), has signed a deal to sell its global tire additives business to One Rock Capital Partners, LLC for $800 million, subject to working capital and other adjustments upon closure. Shares fell 1.3% to close at $126.74 on June 9.

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The rubber additives business is a part of the company’s Additives & Functional Products segment. The sale includes its rubber additives (including Crystex™ insoluble sulfur and Santoflex™ antidegradants) and other product lines and related assets and technology of the global tire additives business, excluding Eastman Impera™ and other performance resins product lines. (See Eastman Chemical stock analysis on TipRanks)

Per the terms of the deal, EMN will receive $725 million in cash upon closing and the balance of $75 million will be received based on the tire additives business’s performance through 2023.

The deal, subject to certain regulatory and closing conditions, is expected to close in the second half of 2021.

The sale is expected to be either neutral or accretive to adjusted EPS in 2022.

Mark Costa, Board Chair and CEO said, “This announcement is part of our ongoing effort to improve the performance of our Additives & Functional Products segment. After reviewing strategic options, we believe this action is the most beneficial to Eastman and the rubber additives business.”

Starting in Q2 2021 and until completion, the assets related to the rubber tires business will be classified as held for sale. Additionally, upon completion of the sale, the company expects to report asset impairment charges or a loss related to the sale.

Recently, Wolfe Research analyst Josh Silverstein initiated coverage on the stock with a Buy rating and a price target of $154, implying 21.5% upside potential to current levels.

With an overall positive stance on the chemicals sector, Silverstein believes the sector is well placed to recover from the COVID-19 downturn.

The Wall Street community is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 8 Buys and 4 Holds. The EMN average analyst price target of $134.42 implies 6.1% upside potential to current levels. Shares have gained 67.6% over the past year.