Shares in chemicals company Synthomer (SYNT) have bounced higher following a morning dip after it announced a £605m deal to acquire American firm Omnova Solutions.
After falling 5% to 352p, which made Synthomer the top loser on the FTSE 250, its shares are now up 2% on yesterday’s close price to 378p.
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The acquisition of Omnova will be funded through new loans and a £204m rights issue, with shareholders able to purchase new shares at 240p per share.
The rights issue is fully underwritten, meaning any shares not taken up by shareholders at the discounted price will be bought by the investment banks involved in the deal.
WORLDWIDE EXPANSION
In a statement, Synthomer said the acquisition will help improve its global footprint, particularly strengthening its position in North America, as well as boosting its presence in Europe and Asia.
Omnova derived 58% of its $769.8m revenue from North America last year. In comparison, Synthomer only generated 6% of its revenue from the region.
Given Omnova’s manufacturing facilities in China, the firm said the deal will also help it penetrate the high-growth Chinese market.
Synthomer supplies aqueous polymers to companies, which help create new products and boost the performance of existing ones. Its polymers are used in many products such as footwear insoles, condoms, packaging tapes, carpets and waterproofing products.
Omnova tends to be more focused on the industrial side, and supplies emulsion polymers which are used in things like adhesives, sealants, lubricants and resins.
KEEPING UP WITH SOARING DEMAND
As demand soars for speciality chemicals which can make products better, mostly due to urbanisation, ageing demographics and more stringent environmental legislation, Synthomer has tried to expand significantly to keep up.
Over the past year, it has expanded or upgraded its operations in Malaysia, Finland, the US and Germany as it looks to keep up with demand for different products in various parts of the world.
The company has also grown through bolt-on acquisitions, but given its management team’s disciplined approach to mergers and acquisitions (M&A), analysts have been waiting for the firm to make a ‘transformational’ acquisition to help it grow significantly.
But while Omnova has a market cap of £229m compared to Synthomer’s £1.26bn, this could be the deal market watchers have been waiting for.
