Lanxess Inks $1.08B Deal To Snap Up Emerald Kalama Chemical

Specialty chemicals company Lanxess has inked a deal to buy US-based Emerald Kalama Chemical for an enterprise value of $1.075 billion.

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The purchase price amounts to $1.04 billion, after deducting debt, which Lanxess (LNXSF) plans to finance from existing liquidity. With this deal, the German chemicals company seeks to strengthen its consumer business and expand its portfolio to preservatives, including for consumer protection products, and animal hygiene and nutrition. The transaction is expected to be completed in the second half of 2021, pending regulatory approval.

Emerald Kalama, which is a global manufacturer of specialty chemicals, including preservatives for food and cosmetics, is majority-owned by affiliates of US private equity firm American Securities LLC. The company has 500 employees worldwide and runs production sites in Kalama, Washington, Rotterdam in the Netherlands and Widnes in Great Britain. About 45% of its turnover is generated in North America.

“We are gaining further momentum on our growth course. The businesses of Emerald Kalama Chemical are an ideal fit for us. We will further strengthen our Consumer Protection segment and open up new application areas with strong margins, for example in the food industry and animal health sector,” Lanxess’ Board of Management Chairman Matthias Zachert commented. “In addition, we will also enlarge our presence in our growth region of North America. All this will make us even more profitable and stable.”

In 2020, Emerald Kalama Chemical generated $425 million in sales and EBITDA of approximately $90 million. Lanxess anticipates an additional annual EBITDA contribution of around $30 million due to synergies, within three years following the completion of the deal. The transaction is expected to be earnings per share accretive in the first fiscal year after its closure. (See Lanxess stock analysis on TipRanks)

Lanxess shares have gained 26% over the past three months. Nonetheless, Deutsche Bank analyst Tim Jones on Jan. 27 lifted the stock’s price target to $93.37 and reiterated a Buy rating.

The rest of the Street is cautiously optimistic about the stock. The Moderate Buy consensus rating shows 8 Buys, 7 Holds and 1 Sell. That’s alongside an average analyst price target of $79.14, which implies 5.7% upside potential lies ahead over the coming 12 months.