LANXESS and Advent form world-leading joint venture for high-performance engineering polymers

● LANXESS and Anhong to acquire DSM's engineering materials business for around EUR 3.
7 billion

● LANXESS transfers high-performance materials business to joint venture

● LANXESS will receive at least 1.
1 billion euros in payments and up to 40% stake in the joint venture

● LANXESS will use proceeds to reduce debt and plan to buy back shares

● New joint venture with leading product portfolio and complete value chain

Specialty chemicals company LANXESS and Advent International ("Advent") are establishing a high-performance engineering polymer joint venture
.
Advent is one of the largest and most experienced private equity investors in the world with a proven track record in chemical investments
.
The two companies have signed an agreement to acquire the DSM Engineered Materials business (DEM) from Royal DSM, which will form part of the new joint venture
.
The purchase price is about 3.
7 billion euros, and the joint venture will be financed through Advent's equity and foreign debt
.
The business has sales of around 1.
5 billion euros and an EBITDA margin of around 20%
.
DSM's Engineered Materials business is one of the world's leading suppliers of high-performance specialty materials for key market needs in the electronics, electrical and consumer goods sectors
.

In addition, LANXESS will contribute its High Performance Materials (HPM) business unit to the joint venture
.
HPM is one of the leading suppliers of high-performance polymers primarily used in the automotive industry
.
The business has annual sales of about 1.
5 billion euros and an EBITDA of about 2.
1 billion euros
.
Advent will hold at least 60 percent of the joint venture
.
LANXESS will receive an initial payment of at least 1.
1 billion euros and a stake of up to 40 percent in the future joint venture
.
After the transfer to the joint venture, the HPM business will no longer be consolidated at LANXESS, but will be included in the consolidated financial statements as equity
.

The move further strengthens LANXESS' business portfolio, which will include three specialty chemicals divisions once the transaction is completed
.
LANXESS will use the deal to reduce debt and strengthen its balance sheet
.
In addition, the group plans to carry out a share repurchase program of up to 300 million euros
.

LANXESS could sell its stake in the joint venture to Advent as early as three years later at the same valuation
.
EBITDA could be significantly higher than today's levels by then, as Advent and Lanxess expect the combination of the two businesses to generate significant synergies
.

The deal is still subject to approval by the authorities
.
It is expected to be completed in the first half of 2023
.

Matthias Zacherthi, CEO of LANXESS, said: "LANXESS will once again significantly reduce its reliance on economic volatility
.
In addition, LANXESS will use the transaction proceeds to strengthen our balance sheet and open up new space for further growth of the group
.
With the new joint venture, we are creating a strong global player in high performance polymers
.
The portfolios, value chains and global positioning of the two companies complement each other
.
With their innovative products, the joint venture will be able to play a key role in shaping the future - For example in the field of electric vehicles
.
At Advent we have a strong and reliable partner with extensive experience in the chemical industry and our customer industries
.
”

Ronald Ayles, Managing Partner of Advent, said: “Joining forces with LANXESS to drive this industry-transforming transaction is a highlight for Advent, as we have built a trusted long-term relationship with the highest mutual respect
.
Together we plan to bring Experience, deep industry knowledge and financial resources make the joint venture a global success story for all participants
.
The combination of LANXESS High Performance Materials (HPM) and DSM Engineered Materials (DEM) creates a powerful platform that brings together We have developed a wide range of expertise, created the best opportunities for our employees and created more value for our customers
.
”

Comprehensive layout and a high degree of backward integration

DSM's engineered materials business includes polyamides (PA6, PA66) as well as various specialty materials (PA46, PA410 and specialty polyesters and PPS)
.
Around 2,100 employees work at 8 production sites and 7 research sites in all relevant markets worldwide
.
In addition to Europe and the United States, the business has a particularly strong presence in Asia
.

The High Performance Materials (HPM) business unit of LANXESS is one of the leading producers of PA6 and PBT engineering polymers as well as thermoplastic fiber composites
.
A total of 1,900 employees work for HPM at 10 production sites and 7 research sites around the world
.
Global production networks are characterized by a high degree of backward integration
.
The most important is the Antwerp/Belgium production site
.
There, HPM produces not only PA6 polymers, but also related raw materials such as caprolactam and glass fibers
.

Sustainable Product Portfolio

Both DEM and HPM are pioneers in the field of sustainability, offering bio-based and recycling alternatives in their product portfolio
.

For example, LANXESS recently launched a new high-performance polymer made from 92 percent sustainable raw materials
.
When producing the polymers, Lanx uses "green" cyclohexane from sustainable sources such as rapeseed oil or other biomass as a feedstock
.
It is reinforced with 60% by weight glass fibers recovered from industrial glass waste
.

future-proof applications

The automotive industry is a key customer sector for the new joint venture
.
There, among other things, polymers are used for lightweight elements in structural parts, but also for interiors, and often replace metal parts
.
This saves weight and reduces CO2 emissions
.
Electric vehicles are an important growth area
.
For example, polymers are used in the manufacture of batteries and charging systems, electronic control systems and power electronics
.

In addition, these materials are used in the electrical and electronics industry, for example in components for smartphones, IT and household appliances
.