German plastics and additives giant Lanxess plans to acquire U.S. firm Chemtura, a major global provider of flame retardant and lubricant additives. With the largest acquisition in its history, Lanxess is building on its own additives portfolio and will become one of the world’s major actors in this growing market.

The transaction is valued at around €2.4 billion ($2.6 billion) and is expected to close around mid-2017, subject to approval by Chemtura shareholders, required regulatory approvals and certain other customary closing conditions.

Chemtura’s two additive segments form the main pillars of the company’s business. Both will, together with Lanxess’ Rhein Chemie Additives business unit (ADD), form the new Performance Additives segment after the closing of the transaction. ADD already offers a wide range of specialty additives and service products for the plastics, rubber, lubricants and colorants production, and employs around 1,600 employees worldwide at more than 20 locations. “Additives is a very attractive business field in specialty chemicals. In addition to their relatively low capital intensity, they require strong expertise and enable customized solutions. In this area, both Chemtura and Lanxess have long-standing expertise,“ said Anno Borkowsky, head of the Lanxess business unit Rhein Chemie Additives.

One of Chemtura’s main businesses is comprised of the brominated flame retardant additives, elemental bromine and other bromine derivatives businesses. Brominated flame retardant additives are used because of their high effectiveness, especially in the construction industry for insulation and in the electronics industry.

Chemtura is a major supplier of bromine and brominated products and is well positioned due to its backward integration. “Flame retardant requirements continue to rise mainly due to the trend for energy-efficient construction,” said Borkowsky, adding: “With this acquisition, we will become a major global supplier of high performance flame retardant additives. In the future, we can offer our customers brominated and phosphorous-based products from one source.” Rhein Chemie Additives already has a competitive position in the phosphorous-based flame retardants business and features a backward integrated value chain. Lanxess also expects medium-term growth rates of three to four percent per year in the field of flame-retardant additives.

Chemtura’s urethane business is a major provider for hot-cast prepolymers and for special, aqueous urethane dispersions and polyester polyols. These are components for special polyurethanes, which are used mainly in the construction, mining, oil/gas, sports and electronics industries. For example, rollers for conveyor belts and roller skates are manufactured from these polyurethanes. The urethanes business will be integrated into Lanxess’ High Performance Materials segment, in which the high-tech plastics business is anchored.

Headquartered in Philadelphia, Pennsylvania, Chemtura has 20 sites in 11 countries and approximately 2,500 employees worldwide. The company reported sales of around €1.5 billion ($1.7 billion) in the last four quarters with EBITDA pre exceptionals of approximately €245 million ($275 million; EBITDA margin of approx. 16%). Approximately 45% of Chemtura’s revenue is generated in North America. In addition to additives, Chemtura’s portfolio includes urethanes and organometallics.

“With this acquisition, we are forming a champion in the field of additives and are strengthening our already profitable portfolio,” said Matthias Zachert, Chairman of the Board of Management of Lanxess AG. “Through the acquisition, we are further implementing our strategy to become a more resilient and profitable chemical company. We are significantly building on our competitive positioning in medium-sized markets and increasing our presence in North America. Lanxess is taking a next and major step forward on its growth path.”

“The transaction provides premium value to our shareholders and benefits our customers and employees by making Chemtura part of a much larger, stronger global enterprise with the resources to fully support a more diverse suite of specialty chemicals products and services,” said Craig A. Rogerson, President, Chief Executive Officer and Chairman of the Board of Chemtura.

Chemtura is also counted among the major companies worldwide in organometallics. Organometallics are chemical compounds that are used, among other things, as catalysts in polymer production and for synthesis of fine chemicals and pharmaceuticals. This business will in the future be part of Lanxess’ Advanced Industrial Intermediates business unit.