The Lubrizol Corporation has announced the acquisition of Noveon International, a speciality chemical producer, to create a combined company. The move complements Lubrizol's existing businesses in fluid technologies and will expand the company's application base within the personal care and specialty coatings markets.
The purchase of Noveon, that generated $1.2 billion in revenues last year, will create a combined company with Lubrizol and is expected to generate approximately $3.2 billion in annualised revenues.
Noveon's businesses include several high-growth, industry-leading product franchises such as Carbopol, acrylic thickeners for personal care, TempRite, chlorinated polyvinyl chloride resins and compounds, Estane, thermoplastic polyurethane, and Hycar, reactive liquid polymers for engineering adhesives and water-borne acrylic emulsions for performance coatings.
The transaction - valued at $1.84 billion - includes a cash payment of approximately $920 million for equity and the assumption of net debt, which was approximately $920 million as of 31 December 2003. To fund the transaction, Lubrizol has secured a bridge financing facility from Citicorp North America, which it intends to refinance after the transaction closes.
"Since 2000, we have made eight smaller acquisitions, with cumulative annualised revenues of $200 million. These acquisitions successfully expanded our product platform beyond our traditional business of fluid technologies for transportation (FTT) into fluid technologies for industry (FTI). Noveon fits into our strategy well by broadening our product lines in personal care and coatings, complementing our geographic reach, opening new market channels and enhancing our industry-leading R&D capabilities," said Lubrizol's president James Hambrick.
Approximately one-half of of Lubrizol will consist of traditional business, which concentrates on lubricant additives for the transportation market. The other half is to concentrate on the higher- growth areas of industrial and consumer-related products.
Following the closing of the transaction, Noveon is to become a wholly- owned subsidiary of Lubrizol. The new Noveon subsidiary will include FTI and will have annualised sales of approximately $1.6 billion resulting in a total of $40 million in cost synergies.
"These synergies are anticipated to come from savings in raw materials, rationalization of manufacturing operations and other consolidation opportunities. We plan to capture these synergies over the next 36 months," said Hambrick.
Other synergies will include a stronger geographic platform for the combined organization. For example, Lubrizol's coatings presence is stronger in Europe, while Noveon's coatings business is stronger in North America.
Both companies also have expanding positions in China and Southeast Asia.