Eastman Chemical Company (NYSE:EMN) announced it and certain of its subsidiaries have entered into a definitive agreement to sell its adhesives resins assets and business to Synthomer plc for total cash consideration of $1 billion dollars. The sale consists of hydrocarbon resins (including Eastman Impera tire resins), pure monomer resins, polyolefin polymers, rosins and dispersions, and oleochemical and fatty-acid based resins product lines. The business is currently part of Eastman's Additives & Functional Products segment.
The total sale price represents a multiple of 11 times trailing twelve-month adjusted EBITDA of the adhesives resins business. The final purchase price is subject to working capital and other adjustments at closing. The company expects the sale to be neutral to adjusted earnings per share in 2022.
"Along with the divestiture of the tire additives business, this sale is part of our effort to improve the performance of the Additives & Functional Products segment," said Mark Costa, Eastman's Board Chair and Chief Executive Officer. "We are pleased to reach this agreement and that our adhesives resins business now has a clear path forward. We will continue to focus on leveraging our innovation-driven strategy to grow our specialty businesses within AFP and deliver strong earnings growth."
"Alongside the diversification of our portfolio, end markets and geographies, our acquisition strategy looks to add new and highly complementary growth opportunities to Synthomer's global portfolio," said Calum MacLean, Chief Executive of Synthomer. "Acquiring Adhesive Resins delivers on that ambition, giving us a leading position in the growing global adhesives market and extending our portfolio of differentiated products and sustainable solutions. It is a business that we have long admired, and I am confident that the combination of Synthomer and Adhesive Resins will drive meaningful value for all stakeholders in the years ahead."
The sale, subject to regulatory approvals and satisfaction of other customary closing conditions, including the consultation of certain employee representatives in the relevant jurisdictions, is expected to be completed in the first quarter of 2022. The agreement contains customary representations, warranties, and covenants of both parties including, among other things, to conduct the adhesives resins business in the ordinary course consistent with past practice.
Beginning in the fourth quarter of 2021 and until sale, the assets of the adhesives resins business will be reported as held for sale.
J.P. Morgan Securities LLC served as exclusive financial advisor, and Jones Day served as legal advisor to Eastman.
Non-GAAP Financial Measures
Earnings in this release exclude certain non-core and unusual items. "Adjusted EBITDA" is net earnings before interest, taxes, depreciation, and amortization adjusted for non-core and unusual items. "Adjusted earnings per share" is diluted earnings per share attributable to Eastman adjusted for non-core and unusual items. "Adjusted net earnings attributable to Eastman" is net earnings attributable to Eastman adjusted for non-core and unusual items. Reconciliations to the most directly comparable GAAP financial measures and other associated disclosures, including a description of the excluded and adjusted items, are available in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of the Forms 10-K and 10-Q filed with the SEC for the periods for which non-GAAP financial measures are presented.
Eastman's financial results forecasts do not include non-core, unusual, or non-recurring items. Accordingly, management is unable to reconcile projected full-year 2022 adjusted earnings per share to projected GAAP earnings per share without unreasonable efforts.
This release includes forward-looking statements regarding Eastman's current expectations for the timing of completion of and the total purchase price for the agreed sale of its adhesives resins business, the expected benefits of the sale, and Eastman's anticipated future financial and operating performance and results. Such expectations are based upon certain preliminary information, internal estimates, and management assumptions, expectations, and plans, and are subject to a number of risks and uncertainties inherent in projecting future conditions, events, and results. Actual results could differ materially from expectations expressed in the forward-looking statements if one or more of the underlying assumptions or expectations prove to be inaccurate or are unrealized. Important factors that could cause actual results to differ materially from such expectations are and will be detailed in the company's filings with the Securities and Exchange Commission ("SEC"), including the Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, that have been filed with the SEC and future public disclosures about and related to the agreed sale of the adhesives resins business. Filings and other public disclosures made by Eastman are available when filed with the SEC and on the Eastman web site at www.eastman.com in the Investors section.
Synthomer is a global differentiated chemicals company listed on the London Stock Exchange. Synthomer produces innovative formulations in the global lattices, dispersions and polymer markets with a broad range of chemistries, including vinyl acetate and acrylic-based dispersions, styrene butadiene latex (SBR latex), re-dispersible powders, powder coatings, and acrylonitrile butadiene latex (NBR latex). The applications served cover a diverse range of end markets, including adhesives, coatings, construction, health and protection, and textiles. Synthomer is a leading player in many of its chosen markets and has a proven record of generating added value to its customers through deep application expertise and strong research and development support. With the acquisition of OMNOVA in April 2020, Synthomer has meaningfully expanded its global presence in many of the same end markets served by Adhesive Technologies, including adhesives, hygiene, and construction. Synthomer's adhesives products are supported by a dedicated team of PhD scientists and have lab capabilities in Akron, Ohio; Roebuck, South Carolina; Marl, Germany; and Shanghai, China.