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Synthomer to Buy Omnova in $824 Million Deal

Synthomer to Buy Omnova in $824 Million Deal

Synthomer said today that it had entered into a definitive agreement to acquire Omnova Solutions for an enterprise value of £654 million ($824 million), including $473 million in shares and $351 million of debt. The transaction has been approved unanimously by the Omnova and Synthomer boards.

Synthomer is offering Omnova $10.15/share, a premium of 58% to Omnova’s closing price on Tuesday, and it is targeting annualized pre-tax cost savings of $29.6 million by the end of the third year after the deal is completed. Completion is subject to closing conditions, including the receipt of regulatory approvals, and approval from Synthomer’s and Omnova’s shareholders. The transaction is not contingent on obtaining financing and it is expected to close in late 2019 or early 2020.(Source)

Synthomer’s acquisition of OMNOVA Solutions (OMN) had two reasons. First of all, the purchase itself seems appealing. OMNOVA has an appealing specialty chemicals company in which the weakness of decreasing markets such as paper and carpet had overshadowed development. And the purchase appears to be a nice fit from both a product and a geographic point of view.

The second reason the agreement is interesting is because for quite a while investors have been waiting for it. Synthomer CEO Calum McLean helped construct Ineos mainly through M&A into the UK’s biggest private business. However, Synthomer’s activity has been mainly relegated to lower tuck-in deals so far. The OMNOVA agreement is not quite a sort of takeover of ‘ bet the house, ‘ but if it works out, it is material enough to increase Synthomer stocks.

Last year, Omnova recorded $769.8 million in revenues. It runs two company segments, specialty solutions and performance materials, with the specialty solutions segment accounted for 63% of last year’s revenues and the performance materials unit 37%.

 

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