Kraton Performance Polymers Inc. (KRA), a maker of polymers used in adhesives and road surfaces, agreed to acquire a unit of Taiwan’s LCY Chemical Corp. (1704) to expand its styrenic block copolymer business.
Kraton investors will get one share of the newly combined company for each share they currently hold, the Houston-based company said today in a statement. Styrenic block copolymers are used to give products more flexibility, strength and resilience.
Ownership will be split 50-50 between LCY and Kraton’s investors. The new company will be based in England and its shares will trade in New York. It will be led by Kraton Chief Executive Officer Kevin M. Fogarty.
The deal will increase Kraton’s operating income by as much as 80 cents a share and cut annual costs by $65 million, the company said. Buying the LCY unit will give Kraton assets including the Taiwanese company’s plant in Huizhou, China.
“This is a consolidating acquisition that increases scale, adds Asia presence” and improves Kraton’s balance sheet, John Roberts, an analyst at UBS AG in Houston, said in a note.
Kraton rose 16 percent to $24.73 at the close in New York, the biggest gain since its December 2009 initial public offering and giving the company a market capitalization of $804 million.
The deal is expected to be completed in the fourth quarter, subject to approval by regulators and the shareholders of Kraton and LCY.
Lazard Ltd. is Kraton’s financial adviser on the deal and Baker Botts LLP is its legal adviser. Citigroup Inc. is LCY’s financial adviser and Skadden, Arps, Slate, Meagher & Flom LLP is its legal adviser.
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