HOUSTON—Styrenic block copolymer maker Kraton Performance Polymers Inc. is merging with the SBC business of LCY Chemical Corp. to create a materials firm with annual sales of more than $2 billion.
Houston-based Kraton and LCY of Taipei, Taiwan, announced the deal on Jan. 28. The combined firm will remain a public company, with ownership split evenly between shareholders of each company.
The new Kraton will continue to be based in Houston and Kraton's Kevin Fogarty will remain the firm's president and CEO.
The combination "will present a number of strategic, operating and financial benefits," Fogarty said in a Jan. 28 conference call. He added that the transaction "will position us for profitable growth in the years to come and will create value for our shareholders."
LCY ranks as the world's third-largest SBC maker based on volume, and had SBC sales of $612 million in the year ended Sept. 30. A recent 220 million pound-per-year capacity expansion in China is expected to increase its SBC sales to $801 million in 2014. In addition to China, LCY also operates SBC plants in Taiwan and Houston.
SBC is the largest of LCY's seven units. The firm also makes polypropylene resin and a range of chemical products.
Kraton has faced financial challenges recently, losing $5.5 million in the first nine months of 2013 as sales fell 11 percent to just over $1 billion. The firm had shown a $13.3 million profit in the same period in 2012. Officials said Kraton's third-quarter performance was impacted by a maintenance turnaround at its plant in Belpre, Ohio.
Kraton also has been affected by wild swings in price for butadiene feedstock in recent years, which has affected both financial projections and results.
On Wall Street, news of the merger sent Kraton's per-share stock price up almost 15 percent to $24.50 in early trading Jan. 28.