Eastman Chemical to buy Solutia for $3.4 billion

In a bid to extend its reach in emerging markets, particularly the Asia-Pacific region, Eastman Chemical is buying specialty chemical maker Solutia Inc. for about US$3.38 billion in cash and stock.  

Eastman, created when Eastman Kodak Co. spun off its film unit in 1994, said sales in the Asia-Pacific region will nearly double with its acquisition of Solutia, the former chemical unit of Monsanto Co.

The companies use similar raw materials and overlap in markets that serve makers of tires and coatings.

Kingsport, Tenn.-based Eastman is assuming Solutia’s debt. According to Solutia’s fourth-quarter earnings statement, its net debt was US$1.22 billion at the end of last year. The St. Louis, Mo.-based company, whose chemicals are used in products from tires to iPads, was spun off from Monsanto in 1997. It emerged from Chapter 11 bankruptcy protection in 2008. Solutia’s net income more than tripled to US$262 million last year while sales rose 7.5 per cent to US$2.1 billion.

“Solutia has transformed itself into a financially strong, innovative performance materials and specialty chemicals company, with enviable market leading positions in virtually every market it serves,” Eastman CEO Jim Rogers said in a statement.

The merger would add to earnings immediately, Eastman said, and the combined company would save about US$100 million a year in costs by the end of 2013.

The companies expect the deal to close around the middle of this year.