Polymer and specialty chemicals producer Crompton Corp. said Wednesday it agreed to purchase Indianapolis-based Great Lakes Chemical Corp. in a stock swap transaction valued at $1.8 billion, including about $250 million of Great Lakes debt and minority interest.
Under terms of the agreement, which has been unanimously approved by the boards of both companies, Great Lakes shareholders will receive 2.2232 shares of Crompton common stock for each share held.
The exchange ratio represents a 10.1 percent premium over Great Lakes' Tuesday closing share price of $27.18, and equals $29.92 per Great Lakes share.
Crompton said the merger will create the third-largest U.S. specialty chemicals company, which will have combined pro forma 2004 revenue of more than $4.1 billion and a market cap of nearly $3.2 billion.
The merged company will be owned 51 percent by Crompton shareholders and 49 percent by Great Lakes shareholders. Robert L. Wood, currently chairman, president and CEO of Crompton, will serve in those capacities for the combined company, which will be headquartered in Middlebury, Conn.
In addition to Robert L. Wood, the board will have five directors from each side, for a total of 11 directors. The new company expects to maintain Crompton's existing cash dividend level of 5 cents per quarter.
Crompton said it will post annual cost savings of about $90 million to $100 million on the deal, which is expected to be accretive to the combined company's 2006 earnings and cash flow per share.
The transaction, which is expected to close by mid-year, is subject to regulatory and shareholder approvals. Morgan Stanley and Citigroup Global Markets Inc. acted as financial advisers to Crompton on this transaction and Merrill Lynch & Co. acted as financial adviser to Great Lakes.
In 2004, Crompton posted a loss of $34.6 million on total revenue of about $2.55 billion. Great Lakes posted earnings of $62.9 million on total revenue of $1.6 billion in the same period. At Dec. 31, 2004, Crompton and Great Lakes had 4,800 and 3,700 employees, respectively.