Lanxess AG and global private equity firm Advent International are joining forces to acquire Royal DSM NV's engineering materials business for €3.7 billion ($3.95 billion).
The business being acquired has annual sales of about €1.5 billion ($1.6 billion) and an EBITDA (earnings before interest, taxes, depreciation and amortisation) margin of about 20 percent, officials with Lanxess in Cologne, Germany, said in a 31 May news release.
Officials said the business is one of the leading global suppliers of high-performance specialty materials that address key market needs in electronics, electrical and consumer goods.
Lanxess will contribute its own High Performance Materials unit to the joint venture. HPM is a leading supplier of high-performance polymers, primarily to the automotive sector. That business has annual sales of around €1.5 billion ($1.6 billion).
Advent will hold at least 60 percent in the joint venture. Lanxess will receive an initial payment of at least €1.1 billion ($1.18 billion) and a stake of up to 40 percent. The firm will use the proceeds of the transaction to reduce debt and to strengthen its balance sheet.
Lanxess also has the option to divest its stake in the joint venture to Advent at the same valuation after three years. The deal is expected to close in the first half of 2023.
In the release, Lanxess CEO Matthias Zachert said that with the joint venture, his firm "will once again become significantly less dependent on economic fluctuations."
"With the new [joint venture], we are forging a strong global player in the field of high-performance polymers," he added. "The portfolios, value chains and global positioning of the two businesses complement each other perfectly."
Lanxess was formed in 2004 when Bayer AG spun off its chemical division and part of its polymers business.
Advent Managing Partner Ronald Ayles said that "joining forces with Lanxess in this industry-transforming transaction is a highlight for Advent, as we have built a trusted, long-standing relationship and share the highest mutual respect."
The DSM unit makes nylon, PET, polybutylene terephthalate, copolyester and other materials. It employs 2,100 worldwide at eight production sites and seven R&D centers.
Lanxess is a maker of specialty chemicals and plastics that employs 14,900 and posted sales of 6.1 billion euros ($6.8 billion) in 2020.
Boston-based Advent has $88 billion in assets under management. Its holdings include German acrylic resin maker Röhm GmbH.