Covestro is acquiring the Resins & Functional Materials business (RFM) from Royal DSM. The transaction will include all of DSM’s Resins & Functional Materials businesses, including DSM Additive Manufacturing and all sustainable coating resins related businesses.
Royal DSM was one of the very first firms to begin offering third party materials for industrial AM systems and applications. The company started by offering photopolymer resins (under the Somos brand), expanding into SLS powders as well as filaments and pellets for extrusion. Only a few weeks ago, DSM had acquired a number a part of Clariant’s AM filament business,.
These businesses represented €1,012 million of DSM’s 2019 total annual net sales and €133 million of DSM’s 2019 total EBITDA. DSM will provide re-stated figures for its Materials Cluster ahead of its Q3 results. DSM anticipates a book profit on the transaction to be recognized upon closing. The Dutch company expects to receive approximately €1.4 billion net in cash following closing, including repayment of RFM’s net debt, and after transaction costs and capital gains tax.
“This sale builds on our approach of actively managing our businesses, as DSM continues to evolve as a purpose-led, science-based company operating in the fields of Nutrition, Health and Sustainable Living,” said Geraldine Matchett and Dimitri de Vreeze, Co-CEOs of Royal DSM. “The deal delivers strong value to DSM and is strategically attractive for all parties. In Covestro, we recognize a company that shares similar views on culture and the value of sustainability. We know that Covestro will be a good owner of these businesses for customers, colleagues and other stakeholders.”
By expanding its portfolio in the market for sustainable coating resins, Covestro is taking a significant step in its long-term corporate strategy to strengthen its sustainable and innovation-driven businesses. Adding about EUR 1 billion in revenues, the integration of RFM is a substantial strategic growth opportunity to expand revenues of the Coatings, Adhesives, Specialties (CAS) segment of Covestro by more than 40% to about EUR 3.4 billion (2019 Pro-forma).
DSM Resins & Functional Materials, containing a Sustainable Coatings division and a Functional Materials division, provides highly-specialized, market-leading products such as resins for use in paints and other industrial applications, and optical fiber coatings. The combination of RFM and Covestro will create a business of enhanced scale and technological capability that will benefit existing and potential customers as well as its employees through a stronger platform for growth. Completion of the transaction, which is subject to the customary conditions and approvals, is expected in H1, 2021.
“This acquisition is an important step for our corporate strategy. RFM enhances the growth trajectory of our business. By combining our strong innovation capabilities, sustainable product portfolios as well as complementary technologies and customer industries, we will unlock significant value. At the same time, it is also a key step to drive innovation for the transition towards a circular economy.“
The acquisition diversifies Covestro’s industry exposure and also significantly strengthens the company’s positioning in attractive high-growth markets. Amongst others, Covestro will become one of the leading suppliers in the field of optical fiber coatings – a market segment with enormous future potential, including the future technology of 5G – and in the attractive high-growth segment of 3D-printing materials, showing an average growth rate of more than 20%. Furthermore, the optimal fit of the combined geographic footprint is strengthening Covestro’s proximity to customers in all key markets and is expanding its global production network by more than 20 sites.
Both businesses are committed to ambitious ESG (Environment, Social, Governance) goals and have an excellent and complementary research pipeline, especially in the area of sustainable high-performance raw materials for the coatings industry. Combining them will allow Covestro to be even more innovative in the field of coating resins and become an even more attractive R&D partner for its customers. Thereby, Covestro will be able to drive innovation and to advance sustainability across the integrated customer industries as well as to pursue the transition to a circular economy even faster.
“The acquisition is strategically and financially a perfect opportunity for us to pursue our long-term growth strategy at highly attractive conditions and tangible synergies. With the chosen financing structure, we are striking the right balance between equity and debt,” said Dr. Thomas Toepfer, Covestro CFO and Labor Director. “We look forward to welcoming our new colleagues under the Covestro roof soon. Together, we will work towards bringing our joint potential to life.”
Closing of the transaction is expected for the first quarter of 2021 and is subject to regulatory approvals, including antitrust clearance.