Celanese has reached a deal to acquire most of DuPont’s mobility and materials (M&M) segment for $11 billion. The deal excludes DuPont’s polyacetal business, which will be sold separately by DuPont.
“The acquisition is our most significant step forward on our path since implementing the EM [engineered materials] model,” said Celanese chairman and CEO Lori Ryerkerk. “This acquisition significantly adds a number of complementary offerings to enhance our support of the end-markets we serve best.”
The acquired DuPont engineering thermoplastics and elastomers businesses had 2021 sales of $3.5 billion and $800 million billion in operating EBITDA, valuing the business at 13.8 times operating EBITDA. It has leading positions in nylon 6-6 engineering thermoplastics, specialty nylons, thermoplastic polyesters, and elastomers. The deal is expected to close around the end of 2022.
Celanese has targeted expansion in its EM business since 2015 with five acquisitions and a shift to a project-based commercial model focused on growth from new product commercialization. Celanese’s existing EM business had 2021 net sales of $2.7 billion with positions in polyacetal, ultra-high molecular weight polyethylene, polybutylene terephthalate, liquid crystal polymers, and thermoplastic elastomers, including thermoplastic vulcanizates, a product line acquired from ExxonMobil Chemical last year.
A little over half of DuPont’s portfolio is devoted to automotive with a growing portion of that going to electric vehicles (EVs), said Tom Kelly, Celanese senior v.p., engineered materials. Another quarter of the business is in electrical and electronics where the company expects compounded demand growth of at least 5%/year through 2027, Kelly said.
“These additions will immediately double the leadership, branding, and integration of the EM product portfolio,” Kelly said. “The fit of our respective product portfolios is unique, as we know and participate in most of M&M’s polymers, but do not currently hold leadership positions or backward integration. As a result, we will be a leader in nearly a dozen different polymers globally, with backward integration in almost as many.”
EVs are a prime growth target, Kelly said. “As part of this we see a tremendous opportunity to play an influential role in the future of EVs and to drive specification of our materials,” Kelly said. “The solutions used in EVs are nowhere near as established as in internal combustion engine (ICE) vehicles. Today, we see a greater content per vehicle opportunity for EM in EVs than in ICE vehicles. When looking at value rather than content, the opportunity is even more significant. This transaction positions Celanese with greater scale and breadth of solutions to win at a critical inflection point in automotive.”
The deal includes 5,000 DuPont employees and 29 plants, including resin and compounding facilities. Celanese expects cost savings of $275 million-$350 million/year within three years of close and revenue synergies of $125 million-$150 million within four years.
Celanese has $11 billion in bridge financing committed and longer-term financing will include term loans and bonds. Celanese will prioritize debt repayment for the next couple years with a target to return to debt levels of below 3 times EBITDA by the end of 2024. “The M&M business has historically been a strong generator of cash flow,” said Scott Richardson, Celanese executive v.p. and chief financial officer. “We are confident in our ability to capture synergies that would allow us to double Celanese total free cash flow within the next five years.”
Celanese expects the opportunity to again deploy cash to M&A or share repurchases as soon as 2025, Richardson said. “The cash profile of Celanese is significantly enhanced by this transaction, which is expected to result in a doubling of our free cash flow generation between 2021 and 2026.”
Celanese expects the deal to be accretive to 2023 adjusted earnings by approximately $2.00/share and $4.00/share or more once full synergies are achieved by 2026. Celanese had previously said it expects adjusted earnings of at least $15.00/share in 2022.
DuPont agreed to retain and indemnify Celanese for certain liabilities, including liabilities relating to PFAS, Celanese said.
DuPont to find separate buyer for polyacetal
DuPont plans to sell its polyacetal business line to another buyer, targeting a closing date for that sale in the first quarter of 2023. Celanese and DuPont have the number 1 and 3 global positions, respectively, in polyacetal. Most polyacetal production is in Asia but Celanese and DuPont are the only current producers in North America and Western Europe. DuPont’s polyacetal product line had 2021 sales of approximately $550 million of net sales and $180 million in operating EBITDA in 2021. DuPont said there is strong interest in the business.
DuPont will retain the auto adhesives, thermoplastics additives, and polyvinyl fluoride (PVF) films part of its M&M segment. The retained M&M businesses generated net sales of approximately $950 million and operating EBITDA of approximately $120 million.
DuPont intends to use proceeds to fund its previously announced $5.2-billion acquisition of Rogers Corporation as well as other M&A and share repurchases.
Celanese is advised by Kirkland & Ellis LLP as principal legal counsel, Gibson, Dunn & Crutcher LLP as financing counsel, and BofA Securities as financial advisor. Goldman Sachs & Co. LLC is serving as DuPont’s financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal counsel.
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