Rohm and Haas (Philadelphia; 215-592-3054), has reached a definitive agreement to acquire Morton International Inc. (Chicago), in a cash and stock deal valued at $4.9 billion, including the assumption of $268 million of net debt. When completed, the deal will create a global specialty chemical company with combined annual revenues of $6.5 billion and new international leadership positions in adhesives, specialty coatings, electronic materials, and salt.
Key Impacted Businesses
Market Advantages (Back to Top)
"The combined company will be a leader in high-growth specialty chemicals," says J. Lawrence Wilson, chairman and CEO of Rohm and Haas. "This will extend Rohm and Haas' technology platform beyond its premier position in acrylic chemistry and electronic materials. Morton's technology will add significant expertise in urethanes, powder coatings, plastic automotive coatings, and inorganic chemistry."
The acquisition will create a specialty adhesives company with $500 million of sales and enter Rohm and Haas into the high-growth powder coatings market with new technologies, Wilson says. It also establishes a $1 billion global electronic-materials company with high growth rates and complements Rohm and Haas' plastic additives and biocide product lines. Morton's salt division will represent 12% of the combined company's revenues.
"We believe that the specialty chemical industry has been undergoing substantial changes to meet customer needs," says S. Jay Stewart, chairman and CEO of Morton International. "By focusing on the right strategic combination, we will position our specialty chemical product lines for faster growth and enhance research and development success."
Stewart says that the transaction will provide an attractive share price; offer Morton employees more opportunities in a larger organization; and expand the geographic and technology platforms available to customers.
Key Impacted Businesses (Back to Top)
AdhesivesMorton is a leading producer of high-value flexible packaging adhesives. These will complement Rohm and Haas' current range of products for tape and labels. The merger joins Morton's polyurethane expertise with Rohm and Haas' world-leadership position in acrylic polymers. Urethane products represent one of the highest value growth opportunities within the adhesives and coatings sectors.
Powder CoatingsMorton is a leader in powder coatings for metal substrates in North America and Europe. The company recently introduced a new product called Lamineer powder coating for alternate substrates such as engineered wood. Rohm and Haas intends to develop its powder-coatings business globally.
Electronic MaterialsIn the last two years, Rohm and Haas has expanded its electronic-materials business with the acquisitions of LeaRonal, Pratta, and 48% of Rodel. When combined with Morton Electronic Materials, this business will supply over $1 billion of electronics specialty chemicals to both semiconductor and printed wiring board manufacturers. Morton also brings new technologies in advanced materials and organometallics, which represent exciting growth opportunities.
Plastic Additives and BiocidesMorton will add heat stabilizers and lubricants to Rohm and Haas' line of impact modifiers and processing aids. Morton currently is benefiting from the shift away from lead-based stabilizers to tin-based alternatives. Its strength in biocide formulations complements Rohm and Haas' position in active biocidal molecules.
Financials (Back to Top)
To complete the acquisition, Rohm and Haas representatives say that the company will tender a cash offer for up to 67% of Morton common stock at $37.125 a share. Based upon Morton's closing price of $25.875 on Jan. 29, 1999, this represents a premium of 43%. Haas family interests, representing approximately 39% of Rohm and Haas shares, have indicated their support for the transaction.
Rohm and Haas says it will acquire the remaining Morton shares in a second-step merger planned for the second quarter of 1999. In this stage, each share of Morton stock will be exchanged for Rohm and Haas shares valued at $37.125. This is subject to a maximum of 1.330645 and a minimum of 1.088710 Rohm and Haas shares for each Morton share.
Rohm and Haas expects the acquisition to save approximately $200 million through jointly purchased raw materials, reduced freight costs, consolidated corporate and administrative programs, and increased efficiencies in operations and business processes. Rohm and Haas will try to minimize workforce effects through reduced hiring and attrition. All union contracts will be honored. Rohm and Haas representatives say that the company is committed to maintaining a meaningful presence in Chicago and its surrounding area.
Management (Back to Top)
J. Lawrence Wilson will remain chairman and CEO of Rohm and Haas. Rajiv Gupta, currently vice chairman of Rohm and Haas, will succeed Wilson as chairman and CEO upon Wilson's retirement. S. Jay Stewart, chairman and CEO of Morton International, will become vice chairman of Rohm and Haas reporting to Wilson.
William Johnston, currently president and CEO of Morton, will become senior VP of Rohm and Haas and a member of the company's executive council. Johnston will be the company's principal operating officer in Chicago. Stewart and two members of the Morton board will join the Rohm and Haas board.
Background (Back to Top)
Morton International manufactures and markets specialty chemicals and salt products with total annual sales for the fiscal year ended June 30, 1998, of $2.5 billion.
Rohm and Haas is a Fortune 400 specialty chemical company with $4 billion in annual sales. The company's specialty products are found in many items that improve the quality of life, including decorative and industrial paints, semiconductors, shampoos and other personal-care items, and water-purification systems.
For more information, call Rohm and Haas at 215-592-3054 or 215-592-2664, or Morton at 312-807-2424 or 312-807-2435.