Solvay to Buy Cytec Industries for $5.5 Billion -- Update

By Gabriele Steinhauser 

BRUSSELS--Belgium-based chemicals company Solvay SA on Wednesday said it is buying U.S. counterpart Cytec Industries Inc. for $5.5 billion in a bid to become a major player in the production of light-weight materials for airplanes and high-end cars.

Solvay said it would pay $75.25 a share for Cytec and finance the deal by raising EUR1.5 billion ($1.66 billion) of capital and issuing EUR1 billion of hybrid instruments and senior debt.

The company said the acquisition would make it one of the leading companies in the market for composite materials for airplanes and should enable it to take advantage of the growing use of such materials in high-end cars. It should also help boost Solvay's business producing chemicals for the mining sector.

"For us, it's making a big entry into aerospace," said Solvay Chief Executive Jean-Pierre Clamadieu.

Cytec produces lightweight composite materials for Airbus's A350 and the Boeing 787, where they help reduce the planes' overall weight and improve fuel efficiency, Mr. Clamadieu said. Solvay expects annual growth of around 10% for such materials in the aerospace sector, he added.

Lightweight composites are also used in high-end cars such as Ferraris and Lamborghinis. Mr. Clamadieu said the use of these materials should increase in other high-end cars that are produced in bigger numbers, although growth predictions on that end are more uncertain.

"What we've paid for is really the growth in aerospace," he said.

Cytec is based in New Jersey, has 4,600 employees and generated revenue of $2 billion last year, mostly in North America and the Europe, Middle East and Africa region.

Mr. Clamadieu said around $1 billion of Cytec's sales came from aerospace.

Solvay said the per-share purchase price is 29% above Cytec's closing share price Tuesday and that the deal had been recommended unanimously by both companies' boards of directors.

Cytec's CEO Shane Fleming welcomed the deal. Solvay's "strategic focus is perfectly aligned with our businesses, while the technology synergies with their specialty polymers and formulations expertise should accelerate our growth," he said.

Solvay said it expected the deal to close in the fourth quarter.

News of the deal came as Solvay said it swung to a net profit of EUR143 million in the second quarter, compared with a EUR292 million loss a year earlier. The year-earlier result had been hit by an impairment charge on Solvay's discontinued European Chlorovinyls business.

Write to Gabriele Steinhauser at [e-mail]

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