LANXESS to acquire IFF's microbial control business

Strengthening the specialty chemicals portfolio, expansion of the growth areas disinfection, personal care and material protection
LANXESS to acquire IFF's microbial control business

LANXESS aims to become one of the world's largest suppliers of microbial control products

Photo - LANXESS

LANXESS is taking another big step on its growth course: the specialty chemicals company intends to take over the microbial control business of the US group International Flavors & Fragrances (IFF). Both companies signed a corresponding agreement on 23 August 2021. IFF Microbial Control is one of the leading suppliers of antimicrobial active ingredients and formulations for material protection, preservatives and disinfectants. The products are used in a wide range of applications, particularly in personal care and household products, industrial water treatment, and paints and coatings.

The transaction is still subject to approval by the relevant antitrust authorities. In addition, the business must first be carved out from the IFF Group. LANXESS, therefore, expects the transaction to be completed in the second quarter of 2022.

The IFF microbial control business represents sales of around US $ 450 million and EBITDA of approximately US $ 100 million. Within four years after the transaction's closing, LANXESS expects synergies to add approximately US $ 35 million (EUR 30 million) in EBITDA. The acquisition is expected to be earnings per share accretive already in the first fiscal year after closing.

"In 2021, all signs are pointing to growth. The acquisition of IFF Microbial Control is already the fourth this year and LANXESS' second-largest ever. The business fits ideally into our strategic direction – specialty chemicals with attractive margins, applications in a wide range of industries and global positioning. It will make LANXESS one of the world's largest suppliers of microbial control products. At the same time, we are enhancing consumer protection to become the strongest segment in the Group and are once again taking LANXESS a decisive step forward in terms of profitability and stability," said Matthias Zachert, chairman of the Board of Management of LANXESS.

LANXESS will pay around US $ 1.3 billion (EUR 1.1 billion) for the acquisition. "Taking into account the synergies we are aiming for, we are achieving an attractive purchase price of 9.6 times EBITDA," said LANXESS, chief financial officer, Michael Pontzen. The Group will finance the purchase price with debt capital and has secured respective bridge financing for this purpose. "We will replace the bridge financing agreed with our banks in the coming months by placing corporate bonds in the capital market. In doing so, maintaining our solid investment grade rating is of great importance to us."

Perfect addition to the material protection business

IFF Microbial Control employs around 270 people and operates two production facilities at its US sites in St. Charles, Louisiana, and Institute, West Virginia. The business also maintains a large partner network with active ingredient manufacturers and formulators. After the acquisition, the business is to be integrated into LANXESS's Material Protection Products business unit.

"Also, thanks to acquisitions in recent years, we are already well-positioned as a microbial control solutions provider. With IFF's microbial control business, we can now expand our portfolio of active ingredients, enabling us to offer our customers additional application-oriented solutions. In addition, we are strengthening our value chain," said Michael Schäfer, head of the Material Protection Products business unit. "The business also gives us access to new technologies and enhances our regulatory position through additional registrations.

IFF Microbial Control offers a comprehensive portfolio of innovative and sustainable solutions. The products extend the life and ensure the functionality of end products, such as paints and coatings, personal care products, detergents, and household cleaners. They also preserve water in industrial applications. Hygiene solutions from IFF Microbial Control are also used in functional textiles. They ensure that these remain germ-free for a longer time.

Share buy-back program will not be continued

With its recent acquisitions, LANXESS has created attractive growth opportunities and is now re-prioritizing its capital allocation. Against this background, the currently suspended share buy-back program will not be continued. The approximately 1.1 million shares already purchased will be canceled.

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