Celanese sees 'unique and unparalleled' fit with $11 billion DuPont buy

Celanese Corp. executives say their company's pending $11 billion cash offer for the bulk of DuPont Co.'s Mobility & Materials business is "unique and unparalleled."

The business being acquired has annual sales of about $3.5 billion. DuPont said the sale price represents an enterprise value multiple of around 14 times the unit's 2021 operating EBITDA.

The deal includes Zytel and Rynite nylon, Crastin polybutylene terephthalate, and Vamac and Hytrel elastomers.

"This acquisition will establish Engineered Materials as the preeminent specialty materials company," Celanese Chief Financial Officer Scott Richardson said.

He added that Celanese should be able to benefit from the DuPont deal in the same way that it's benefited from its previous acquisition of the Santoprene thermoplastic vulcanizate (TPV) business.

"These are recognizable brands (at DuPont) and much like when we did the Santoprene acquisition, customers ask for the brand; they don't ask for the chemical name," Richardson said.

"They ask for the DuPont brand and the power of that, when you take that brand equity and put that onto the way that we drive projects ... we think bringing that together with the legacy Celanese polymers ... gives us really good revenue synergy optimization opportunities."

Tom Kelly, senior vice president for Celanese Engineered Materials, added that "in terms of the quality of the businesses ... DuPont is far and away the leader in (nylon 6/6) and in the Hytrel elastomer space."

"They've just got a fantastic portfolio of vertically integrated polymer families that link up really well with what we do, so we're really excited about having those as part of the portfolio," he said.

Moving ahead, Kelly added that "we are going to do what we've been doing in our own assets, which is really looking at opportunities to get more efficient on using lines, a lot less changeovers, putting single polymers on each line. ... That naturally gives us the ability to get more on stream reliability time and get more capacity out."

Celanese also could grow in medical and electrical/electronics markets from the deal.

"In medical, where we have a really strong channel to market and have been in that market for many years, DuPont hasn't really been playing very much. ... So, that's wide open space for us," Kelly said. "If you look at the E&E space, what's interesting is we were about the same size as DuPont on a revenue basis. If you can think about the scale of us taking the DuPont portfolio more broadly into our E&E customers, there's a lot of opportunity there."

The acquisition of DuPont Teijin Films also will provide a growth opportunity for Celanese. "We saw (DuPont Teijin Films) as two things," Kelly said. "One, a downstream consumer of Rynite PET, so it's important to continue that vertical integration. And we also thought about it as the ability to access a different form factor for Celanese.

"Films are not something we've traditionally been in, so being able to access that, understand how we can leverage that for other products in our family, was important."

The deal includes 29 global manufacturing sites and an intellectual property portfolio of about 850 patents. The business being acquired employs around 5,000 in manufacturing, technical and commercial roles.

The deal does not include DuPont's Tedlar fluoropolymer, Multibase silicone additives or Delrin acetal businesses. Dallas-based Celanese is already the world's largest acetal maker.

Industry consultant Robert Eller said in an email that the Celanese-Dupont deal "presents synergies resulting from the ability to bundle or offer a package that includes engineering thermoplastics and thermoplastic elastomers."

"TPEs have been trying for years to benefit from ETP sector developments and market presence," said Eller, president of Robert Eller Associates in Akron, Ohio. "There will be product development, sales/marketing, path-to-market, global scale, economies of scale and R&D synergies.

"The ability to combine rigid and flexible combinations, a trend in the marketplace, is an immediate/obvious benefit. The combination offers immediate path-to-market advantages for Celanese, especially in the very high-growth EV automotive sector," he said.

For example, Eller said, product designers working on projects that need both rigid and flexible components now would be able to develop "an integrated offering with associated benefits."

DuPont Chairman and CEO Ed Breen said the sale "represents a significant milestone in DuPont's transformation as a premier multi-industrial company … to further define DuPont as a market leader in the areas of electronics, water, industrial technologies, protection and next generation automotive."

DuPont will continue to seek a separate buyer for its Delrin acetal business, according to Breen. That business has annual sales of about $550 million. "There is substantial interest in this high-quality asset," Breen said.

The deal with Celanese is scheduled to close around the end of 2022.

Nylon is a major part of DuPont's history. The firm began commercial production of nylon 6/6 fiber in December 1939 at a newly built plant in Seaford, Del., about 90 miles from company headquarters in Wilmington. DuPont's work on developing nylon was led by Wallace Carothers, a legendary researcher who left the faculty of Harvard University to join DuPont in 1928.

Within the first four years following the close of the transaction, Celanese expects to achieve run-rate synergies of around $450 million as a result of the complementary fit of the businesses. It's also expected to add $4 or more to Celanese's per-share stock price by 2026.

Celanese's total sales for 2021 were up almost 51 percent to a little more than $8.5 billion, even as the firm's profit declined 5 percent to $1.9 billion. Celanese's Engineered Materials unit, including acetals, posted sales of $2.7 billion, up more than 28 percent, and adjusted earnings before interest and taxes of $571 million, up more than 41 percent.