AVON LAKE, Ohio—PolyOne Corp. has struck a deal with Clariant A.G. to buy its masterbatches business for $1.45 billion.
The agreement, disclosed Dec. 19, follows months of speculation and failed discussions between Clariant and Sabic.
Set for completion in the third quarter of 2020, the transaction values the Clariant business at $1.56 billion, representing roughly 11.1 times the annual earnings before interest, taxes, depreciation and amortization.
"It's a perfect match and one that aligns with the world's megatrends," Robert Patterson, PolyOne chairman, CEO and president said in a conference call. He also termed the acquisition "truly transformational" adding that the combination will make PolyOne a $4 billion business that will be "truly global."
The deal includes the sale of Clariant's global masterbatches business, with $1.1 billion in annual sales, and a separate agreement to sell the masterbatches business in India for $60 million. Clariant referred to the value of the sale at nearly $1.6 billion in its news release. Patterson said the difference between the two companies' numbers is due to accounting differences based on how each firm lists leases.
Avon Lake-based PolyOne was formed in 2000 and posted 2018 sales of $2.9 billion.
With the Clariant operations, it will add with 46 manufacturing operations and technology centers in 29 countries and about 3,600 employees. They will be added to PolyOne's Color, Additives and Inks segment.
The closing of both transactions is subject to all customary closing conditions and regulatory approvals.
Patterson said PolyOne will continue to seek out additional acquisitions to fill openings in its composites operations.
The divestment fits within the strategy launched by Clariant in 2015 to streamline the company's portfolio and concentrate on the three core business areas of Care Chemicals, Catalysis and Natural Resources.
As part of that strategy, Clariant sold its health packaging unit to New York-based private equity firm Arsenal Capital Partners for 280 million euros earlier in the year.
"This announcement is a significant milestone on our path to focusing on businesses with above-market growth, higher profitability and stronger cash generation," Clariant Chairman Hariolf Kottmann said in a news release.
The company also expects to divest its non-core pigments business in 2020 as its builds "the new, more focused" Clariant by 2021, Kottmann added.
In July, negotiations between Clariant and Saudi Basic Industries Corp. (Sabic) fell apart as the two sides failed to reach agreement over the creation of a "a new stand-alone specialties business," which combined Clariant's additive and masterbatch business with parts of Sabic's engineering resins business.
At the time, the companies said plans for the joint venture had been shelved due to "current market conditions," and could be picked up at a later stage with a different scope.
According to Clariant, the proceeds from the divestment of non-core activities will be used to invest in innovations and technological applications within the core business areas.
Clariant's masterbatches business offers color and additive concentrates and performance solutions for plastics. In the financial year 2018, ended September 2019, the unit generated sales of about $1.15 billion.