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Solutia Surges on Takeover

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Solutia Inc. (NYSE: SOA) shares are surging over 40% in morning trade after the company agreed to be acquired by specialty chemical company Eastman Chemical Co. (NYSE: EMN) for about $3.38 billion in cash and stock. The purchase of Solutia will help Eastman broaden its presence in the Asia Pacific region and other emerging markets while expanding its product offerings.

In the deal announced Friday, Solutia shareholders will receive $22 in cash and 0.12 shares of Eastman Chemical stock for each share of Solutia that they own. Based on Thursday’s closing prices, Solutia shareholders will receive cash and stock valued at $27.65 per Solutia share. That represents a 42 percent premium over Solutia’s closing price on Thursday.

Eastman said Friday that it expects the deal to immediately add to its earnings. It’s shares are currently up about 8% on the news. The companies value the deal, including debt, at about $4.7 billion. Both Eastman Chemical and Solutia’s boards have approved the transaction, which still requires the approval of Solutia shareholders. The acquisition is expected to close in mid-2012.


Eastman plans to fund the cash portion of the deal with cash on hand and debt. Eastman Chemical expects about $100 million in annual cost savings by the end of 2013, as the acquisition is expected to help lower corporate costs and improve manufacturing and supply chain processes.

Eastman Chemical Chairman and CEO Jim Rogers said in a statement that the transaction is important in part because it will extend the company’s reach into the Asia Pacific region. Eastman Chemical anticipates that it will have a compound annual growth rate in Asia Pacific approaching 10 percent for the next several years.

“The acquisition of Solutia is a significant step in our growth strategy and one that I am confident will strengthen Eastman as a top-tier specialty chemical company with strong, stable margins,” Rogers said.

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edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.


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Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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