Lanxess to acquire elastomers business from DSM

EPDM is used primarily in the automotive industry but also sees use in plastics modification, wire and cable extrusion and coating, construction and in oil additives. Its properties include very low density, good resistance to heat, oxidation, chemicals and weathering as well as good electrical insulation properties.

The price for the DSM Elastomers business represents an EBITDA multiple of roughly 6 based on the expected EBITDA of 2010. The acquisition will be financed by Lanxess (Leverkusen, Germany) from existing liquidity and is expected to be earnings-per-share (EPS) accretive as of 2011.
 
The transaction contracts will be finalized once a consultation process with the employees' representatives of DSM in the Netherlands has been completed. The transaction is subject to approval from antitrust authorities. Closing is expected in the first months of 2011.
 
DSM Elastomers (Geleen, The Netherlands) has approximately 420 employees worldwide and is on track to close this year with sales of €380 million in 2010. DSM operates an EPDM plant in Sittard-Geleen, the Netherlands, with an annual production capacity of 160,000 tonnes. DSM's other EPDM plant is based in Triunfo, Brazil, with an annual capacity of 40,000 tonnes.

Lanxess plans to base the headquarters of the combined EPDM businesses in Sittard-Geleen. Te buyer's technical rubber products business unit sells EPDM under the brand name Buna EP. It produces the material at plants in Marl, Germany, and Orange, TX, with a combined annual capacity of 120,000 tonnes.
 
According to Lanxess, global demand for EPDM is expected to show single-digit percentage growth per annum in the next ten years, driven by rising demand in China and Brazil. Earlier this year Lanxess announced it would increase its capacity for thermoplastics compounding in China; Lanxess supplies the thermoplastics polyamide 6 and 66 (the company's Durethan brand) and polyester (Pocan). It also supplies some plastics-relevant additives and glass fiber for reinforcement of compounds.