Chemtura to Divest Agrochemicals Biz for $1B - Analyst Blog

Specialty chemicals company Chemtura Corporation CHMT has cut a definitive deal to divest its agrochemicals business – Chemtura AgroSolutions – to Florida-based specialty chemicals maker Platform Specialty Products Corporation (PAH) for roughly $1 billion.
 
The purchase consideration will be financed with $950 million in cash and 2 million shares of Platform's stock. The deal, which is subject to customary purchase price adjustments, regulatory clearances and other closing conditions, is expected to consummate in second-half 2014.
 
Chemtura's shares closed at $23.16 on Apr 17, losing around 8%. The stock is down roughly 15% so far this year.
 
Chemtura AgroSolutions, which offers seed treatment and agrochemical products for an array of crop applications, raked in sales of $449 million and adjusted EBITDA of $101 million in 2013. Its product portfolio includes seed treatments, insecticides, miticides, herbicides, fungicides and plant growth regulators.
 
Following the completion of the transaction, Chemtura's core business will be focused on two segments – Industrial Performance Products (IPP) that makes petroleum additives and urethanes, and Industrial Engineered Products IEP that produces flame retardants and brominated products, and organometallics. These businesses are leaders in the respective markets they cater to and are well placed for strong performance and future growth.
 
The sale of the agrochemicals business will enable Chemtura to transform into a pure-play industrial specialty chemicals company. The divestment will allow for greater management focus on opportunities across IPP and IEP segments, each having manufacturing, sales and distribution characteristics that provide end-market synergies.
 
Chemtura spent $4 million in first-quarter 2014 on its exploration activities related to the sale of the agrochemicals business. The company generated net sales of around $1.8 billion and adjusted EBITDA of $200 million on a pro-forma basis in calendar year 2013.  
 
Chemtura remains focused on expanding in faster growing economies and markets to capture new product opportunities while establishing appropriate value-based pricing levels for its products. The company is emphasizing on managing costs and improving operating efficiency.
 
Chemtura, in Dec 2013, completed the sale of its Consumer Products business, including dedicated manufacturing plants in the U.S. and South Africa, to KIK Custom Products Inc. for an adjusted purchase price of $300 million. The sale is expected to expand the company's margins to meet financial and strategic performance targets.
 
Chemtura is a Zacks Rank #3 (Hold) stock.
 
Other companies in the specialty chemicals space with favorable Zacks Rank include Globe Specialty Metals, Inc. GSM and Rockwood Holdings, Inc. ROC, both holding a Zacks Rank #2 (Buy).