Royal DSM has reached an agreement to sell its Resins & Functional Materials (RFM) and associated businesses to Covestro AG for an Equity Value of €1.6 billion ($1.9 billion).
Completion of the transaction, which is subject to the customary conditions and approvals, is expected in the first half of 2021.
The transaction will include all of DSM’s Resins & Functional Materials businesses, including DSM Niaga, DSM Additive Manufacturing and the coatings activities of DSM Advanced Solar. These businesses represented €1,012 million ($1.2 billion) of DSM’s 2019 total annual net sales and €133 million ($156.3 million) of DSM’s 2019 total EBITDA.
DSM will provide re-stated figures for its Materials Cluster ahead of its Q3 results.
DSM anticipates a book profit on the transaction to be recognized upon closing. The company expects to receive approximately €1.4 billion ($1.65 billion) net in cash following closing, including repayment of RFM’s net debt, and after transaction costs and capital gains tax.
Geraldine Matchett and Dimitri de Vreeze, Co-CEOs of Royal DSM, commented: “This sale builds on our approach of actively managing our businesses, as DSM continues to evolve as a purpose-led, science-based company operating in the fields of Nutrition, Health and Sustainable Living. The deal delivers strong value to DSM and is strategically attractive for all parties.”
Covestro says the integration of DSM’s resins and functional materials businesses is a substantial opportunity to expand annual revenue at Covestro’s coatings, adhesives, and specialties segment by more than 40% to about €3.4 billion ($4 billion), on a 2019 pro-forma basis, Covestro says. The company expects cost savings to build up to about €120 million ($141 million) on an annualized basis from full integration by 2025.
Markus Steilemann, CEO of Covestro, commented: “By combining our strong innovation capabilities, sustainable product portfolios, as well as complementary technologies and customer industries, we will unlock significant value. At the same time, it is also a key step to drive innovation for the transition towards a circular economy.”
Covestro informed that the transaction will be financed with a combination of equity, debt instruments, and own cash generation, consistent with the company’s commitment to maintaining a solid investment-grade rating. For which, Covestro is planning to utilize its existing, authorized share capital for an equity issuance to raise approximately €450 million ($529 million), it says.