BERWYN, Pa.—Trinseo S.A. is selling off its synthetic rubber business in a deal worth nearly a half a billion dollars.
For Trinseo, the move is part of a larger overall push to improve profits and concentrate on less-cyclical businesses.
For Synthos S.A., the deal gives access to higher-margin markets and expands the company's reach around the world.
"This acquisition fits into our strategy of continuous product portfolio expansion, which will allow us to satisfy the complete needs of the customer, which is a critical factor for success in the global synthetic rubber market," Synthos CEO Zbignew Warmuz said in a statement.
"We believe that the synthetic rubber business brings a range of technologically advanced SSBRs, including functionalized SSBR grades used for high-performance tires," he said.
Synthos is paying $449.4 million in cash for Trinseo's SR business, based in Schkopau, Germany, and will assume $41.6 million in pension liabilities in a transaction valued at $491 million in total. Trinseo expects to receive $400 million in cash after paying taxes and covering the costs of the deal on its end.
"The company believes Synthos is well-positioned to leverage the numerous growth opportunities associated with synthetic rubber, and its strategic commitment to the synthetic rubber industry makes it an ideal owner," Dina Silver Pokedoff, Trinseo's corporate communications director, said in an email interview.
The move comes after Trinseo indicated in December it was looking to offload its SR business "as part of a critical step in the transformation of our company and a renewed focus on higher margin, less-cyclical business lines," she said.
"Trinseo had stated at that time that it believes there are other owners better positioned to grow the synthetic rubber business, potentially ones with backward integration to butadiene and other feedstocks and with global scale, creating more value going forward for investors and additional growth opportunities for employees," Pokedoff said.
Trinseo will remain in the plastics and latex binders business following the SR divestiture.
Synthos expects the acquired business will provide 50 million to 60 million euros in earnings before interest, taxes, depreciation and amortization each year. And there will be about 20 million euros in annual savings, driven mostly by utilization of currently idle capacity, cost savings by combining the two businesses, and the introduction of new SSBR and Li-PBR grades with higher margins that Synthos currently produces elsewhere, the CEO said.
Trinseo's SR business includes about 440 employees, mostly at its operation in Schkopau. The staff is expected to join Synthos once the transaction closes. It also includes the transfer of Schkopau-based manufacturing and research and development facilities along with related intellectual property. The business manufactures solution and emulsion SBR, with capacity to produce 200,000 metric tons of SSBR and 130 tons of ESBR in Schkopau.
For 2020, Trinseo's SR business posted sales of $320 million, down 27.4 percent from the $441 in revenue for 2019. Adjusted EBITDA was $2 million last year, compared to $41 million in 2019. The SR business did rebound somewhat in the first quarter of 2021, with sales climbing 22 percent to $124 million, and adjusted EBITDA up 7.7 percent to $14 million.