Lanxess JV in €3.7bn deal to buy DSM engineering materials unit

Cologne, Germany – German speciality chemicals company Lanxess AG and Boston, Massachusetts-based private equity firm Advent International are forming a joint venture to acquire DSM Engineering Materials business.

In a statement 31 May, Lanxess said the JV partners had signed a deal with DSM to buy the engineering materials unit for €3.7 billion. 

The transaction is subject to approval by the authorities and is expected to close in the first half of 2023.

The JV, to be “at least 60% owned by Advent”, will also include Lanxess’ high-performance materials business (HPM), said the German supplier.

HPM reported sales of €1.5 billion last year, and earnings (EBITDA pre exceptionals) of around €20 million while the DSM unit posted revenue of around €1.5 billion, and earnings (EBITDA) margin of 20%.

Over the medium-term, both Lanxess and Advent expect the JV to increase earnings "significantly" due to “substantial synergies” achieved from the combination of the two businesses.

The DSM unit's portfolio includes engineering materials, with products such as thermoplastic elastomers (TPEs), polyamides and speciality polyesters.

It employs around 2,100 people across eight production and seven research sites globally. In addition to Europe and the US, the business has a particularly strong presence in Asia.

Lanxess’ HPM business produces PA6 and PBT engineering polymers and thermoplastic fibre composites.

It has 1,900 employees at 10 production and seven research sites.

According to Lanxess, the unit’s production network is characterised by “a high degree of backward integration”, with its Antwerp, Belgium facility serving as the backbone of the business unit.

With the deal, Lanxess will receive an initial payment of at least €1.1 billion and a stake of up to 40% in the future joint venture.

Following the transfer to the joint venture, the HPM business will no longer be fully consolidated at Lanxess, but will be included in the consolidated financial statements at equity.

The Cologne-based supplier said the move will further sharpen its business portfolio, which will consist of three speciality chemicals segments once the transaction is completed.

Lanxess will use the proceeds of the transaction to reduce debt and to strengthen its balance sheet.

The German company will also have the possibility to divest its stake in the joint venture to Advent at the same valuation earliest after three years.

“Lanxess will once again become significantly less dependent on economic fluctuations,” said CEO Matthias Zachert.

In a separate statement, DSM said the proposed transaction marks the conclusion of the review of its two materials businesses, which also saw the sale of DSM Protective Materials to Avient Corp. in April.

With the divesetment, DSM will transform into "a focused science-based leader in health, nutrition & bioscience."

According to DSM, the new JV will create a "global speciality materials company with the focus and investment that can drive the development of customer-focused innovation, in particular for industry’s transition to bio-based and circular solutions. "