Kraton merging with LCY Chemical's SBC operation

ERJ staff report (BC)

Houston, Texas – Kraton Performance Polymers Inc. has agreed to combine with the styrenic block copolymer (SBC) operation of Taiwan-based LCY Chemical Corp.

The agreement calls for LCY to contribute its SBC business in exchange for newly issued shares in a combined company, so that Kraton's shareholders and LCY will each own 50 percent of the outstanding shares of the combined enterprise. On completion Kraton, as well as the entities owning LCY's SBC business, will become subsidiaries of the combined company.

The combined company will be incorporated in the UK, will be listed on the New York Stock Exchange, and will be led by Kevin Fogarty, Kraton's President and CEO. The administrative headquarters will be at Houston.

Fogarty said: "We expect the combination to result in synergies of $65m (€47.5m) on a run-rate basis by 2017, which will be achieved through fixed-cost rationalisation, optimisation of variable costs and through reductions in overhead costs. We estimate we will incur costs totalling approximately $70m (€51m) in the next three years to achieve these synergies.”

The transaction is expected to close in the fourth quarter of 2014, subject to the usual regulatory approvals.

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News release from Kraton