Target Information

Kemira Oyj has confirmed the second phase of its acquisition of the water treatment and acrylamide business from Cytec Industries, Inc. The initial phase of the transaction, completed in October 2006, encompassed the acquisition of the complete product lines, excluding the Botlek site and certain assets within specific subsidiaries located in Asia-Pacific and Latin America. This second phase successfully achieves the transfer of the Botlek facility, based in the Netherlands, while the remaining assets from Asia-Pacific and Latin America are anticipated to be transferred in the second quarter of 2007.

The overall purchase price for the Cytec business is estimated to be EUR 190 million. This includes EUR 16 million allocated for the second phase of the acquisition and approximately EUR 10 million for the final phase expected later on.

Industry Overview

The water treatment chemicals sector is a vital component of the environmental services industry, addressing the essential need for clean water in both municipal and industrial applications. In recent years, the industry's growth has been driven by increasing environmental regulations and rising awareness of water scarcity issues, particularly in developed economies. Countries like the Netherlands, where Kemira's Botlek site is located, have invested significantly in enhancing water quality and sustainability measures.

In the Netherlands, water treatment remains a key focus for both government and private sectors, as they strive to meet stringent EU water quality directives. With a robust infrastructure in place, the country is a leader in water treatment technology, providing a competitive backdrop for water chemicals businesses. This dynamic environment encourages companies like Kemira to strategically expand their offerings and market presence.

Additionally, the global market for water treatment chemicals is expected to grow at a steady pace due to the rising demand for safe drinking water, wastewater treatment innovations, and advancements in green chemistry. As competition intensifies, businesses will need to continuously innovate their products and services to succeed.

For Kemira, this acquisition positions the company to leverage Cytec's established product capabilities and market presence while enhancing its own operations and technological portfolio. The integration of Cytec's water treatment chemicals will be crucial for maintaining competitive advantage in an evolving industry landscape.

Rationale Behind the Deal

The acquisition of Cytec's water treatment chemicals business aligns strategically with Kemira’s growth objectives by expanding their product portfolio and geographical reach. By integrating Cytec's operations, Kemira aims to strengthen its position within key markets and customer segments.

Furthermore, this deal is set to significantly bolster Kemira's earnings potential; with the 2006 revenue of Cytec's business estimated at EUR 265 million, the acquisition will contribute to a nearly 70% increase in Kemira's revenue from its water chemicals segment, raising it to approximately EUR 700 million.

Investor Information

Kemira Oyj is a globally recognized leader in the chemical industry, specializing in a diverse range of sectors including pulp and paper, water treatment, performance chemicals, and coatings. The company boasts a formidable presence across 40 countries and employs approximately 8,000 individuals.

In 2005, Kemira reported revenue of around EUR 2 billion. The company’s operational capacity combined with its focus on innovation positions it well to capitalize on the growing demand within the water treatment sector, making it an influential player in the market.

View of Dealert

This acquisition appears to be a strong strategic move for Kemira, positioning the company favorably to leverage increased market share and operational efficiency within the water treatment sector. The integration of Cytec's business enhances Kemira's existing portfolio and opens new pathways for growth, particularly in markets where demand for water quality solutions is expanding.

Moreover, the potential uplift in revenues and market presence underscores the financial viability of the deal. The projected increase in earnings per share for Kemira in 2007 suggests an optimistic outlook for investors.

However, careful integration and management of the Cytec assets will be critical in maximizing the value of this acquisition. While the deal holds promise, success will depend on Kemira's ability to execute its growth strategy effectively and adapt to the evolving industry landscape.

Overall, this acquisition could represent a turning point for Kemira, affirming its status as a leading supplier in the global water treatment market, provided the company navigates the integration process successfully.

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