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June 24, 2019 06:19 PM

Trinseo positions for growth, innovation with acquisition of Dow latex assets

Miles Moore
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    Hayati Yarkadas

    BERWYN, Pa.—Trinseo S.A.’s acquisition of Dow Chemical Co.’s German latex assets indicates the company’s interest in both expansion and product innovation, according to Trinseo executives.

    Trinseo said May 2 it had signed a definitive agreement to acquire Dow’s latex production facilities and related infrastructure at Rheinmunster, Germany. The deal is expected to close in the second half of 2019, subject to customary closing conditions and regulatory approval from the European Union.

    The price of the transaction is about $44.7 million in the form of assumed pension liabilities for the approximately 114 employees expected to transfer from Dow to Trinseo, the company said.

    In a news release, Frank Bozich, Trinseo president and CEO, said the acquisition at Rheinmunster directly is related to the company’s growth strategy in latex binders, especially in the adhesives and construction industries.

    “Taking full control of these advantaged manufacturing assets will allow Trinseo to produce a wider variety of products, invest capital for technology upgrades, and optimize operations for the mix of products and chemistries most needed by our customers,” Bozich said in a statement.

    Hayati Yarkadas, Trinseo senior vice president and business president, performance materials, said in the news release the Rheinmunster site is well-situated for future expansion, because Rheinmunster already is the home of Trinseo’s research and development center for latex binders.

    A Trinseo spokeswoman said it was too soon to discuss any possible expansions or further acquisitions, except to repeat that the Rheinmunster acquisition will provide Trinseo the opportunity for further expansion once the deal is finalized.

    For Trinseo to acquire a Dow operation is in some ways a turn of the circle, because Trinseo was once Styron L.L.C., the styrenics business of Dow.

    Dow sold Styron to Bain Capital L.L.C. in 2010 for $1.6 billion, and the company changed its name to Trinseo the following year.

    The Trinseo spokeswoman declined comment when asked whether there would be any more acquisitions from Dow, or any continuing connections between the two companies.

    Trinseo has seen some major changes in the past year, particularly the appointment of Bozich, former CEO of specialty chemical manufacturer SI Group, as its new president and CEO in March 2019. Bozich replaced Chris Pappas, who retired after serving in those positions since 2010.

    The company also has introduced some important new products, such as a new grade of multi-functionalized solution SBR, Sprintan 918S, which it unveiled during the Tire Technology Expo in Hanover, Germany, in March.

    Sprintan 918S, Trinseo said, is ideal for use in high-performance tires on sport-utility vehicles and light trucks.

    In a telephone interview, Yarkadas said Sprintan 918S has piqued significant interest from a number of tire manufacturers.

    “SSBR is one of the most strategic product lines in our portfolio,” he said.

    Functionalized SSBR is a major focus of Trinseo in meeting the requirements of high-performance tire manufacturers, according to Yarkadas.

    “We have to have chemical functionalization of SSBR,” he said.

    Processability and optimal functionalization of tread rubber are all-important for the HP market, and requirements vary from customer to customer and tire to tire, Yarkadas said.

    “Non-functionalized SSBR doesn’t get you there,” he said.

    However, despite advances in Trinseo’s SSBR technology, the company has suffered sales and profit declines in its synthetic rubber segment.

    The company’s SR sales fell 16 percent in the first quarter of 2019, to $125 million, because of lower SSBR sales, Trinseo said in its first-quarter financial report.

    Weaker demand in the tire and automotive markets hurt sales, as did negative currency factors, according to the report.

    Earnings in that sector dropped 65.4 percent year-to-year, to just under $9 million, Trinseo said.

    Trinseo announced in January that the tire market slowdown had forced it to take cost-cutting measures, including a work force reduction.

    Yarkadas said the company made the adjustment at the end of 2018, involving “a few percentage points” of workers correlating to the maintenance, warehouse and laboratory segments.

    “If you’re a company in the chemical industry, you have to look at costs,” he said. Meanwhile, the HP tire market continues to enjoy a growth rate in the high single digits.

    “We’re not seeing 12 percent average growth, but 7 or 8 percent,” he said.

    Trinseo will continue to look at operational costs in determining employment at the company, according to Yarkadas.

    “Right now, our focus is on innovation,” he said.

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