Switzerland-based Lonza Group Ltd. confirmed the agreement Monday in a joint announcement with Arch Chemicals.
Under the terms of the transaction, Lonza will acquire all outstanding shares of Arch Chemicals at $47.20 per share in cash. Arch Chemicals’ board of directors has unanimously recommended Lonza’s cash offer to its shareholders.
Headquartered in Norwalk, Conn., Arch is “... a global biocides company providing innovative solutions to destroy or to selectively inhibit the growth of harmful microorganisms,” according to the Arch Chemicals and Lonza announcement.
Arch Chemicals operates a plant near Charleston on a 100-acre site that employs 350 workers. In late April, Arch Chemicals announced plans to invest $30 million in technology upgrades at the north Bradley County manufacturing facility in order to improve energy efficiency and to reduce its carbon footprint.
The Charleston plant is the world’s largest calcium hypochlorite manufacturing facility. It obtains its chlorine and caustic soda — two key raw materials for its swimming pool sanitizers — from the neighboring Olin Chlor Alkali plant.
Arch Chemicals is one of Olin’s largest suppliers and Olin is one of Arch’s largest customers, according to local Arch plant officials.
Mark E. Faford, vice president of Investor Relations and Corporate Communications for Arch Chemicals, said this morning the acquisition is a “key strategic project” intended to grow both businesses. Earlier announced plans by Arch Chemicals for the major technology upgrade investment will not be impacted by the acquisition, he said.
“Lonza understands this is a key strategic project,” Faford acknowledged. “We are proceeding as planned.” He added, “We have no plans to change.”
Arch Chemicals corporate representatives were on-site Monday at the Charleston plant to announce the acquisition and to answer employees’ question, Faford confirmed.
“We had people at the Charleston plant ... we talked about the press release” and communicated the announcement to local workers, he said. Faford pointed out Arch Chemicals executives met with employees in groups to give them reassurances and to help them understand the acquisition.
“This is a growth story,” the Arch Chemicals executive explained. He stressed, “... It is business as usual [with] no expected disruptions.”
Because the two companies’ products and technologies are “highly complementary based on a broad portfolio of registered and approved active ingredients,” Lonza leaders expect “substantial cost synergies” of at least $50 million per year by the second year of the transaction, according to the press statement. Lonza also anticipates “additional revenue synergies through combined portfolio and enhanced product offerings,” the joint news release cited.
The transaction is subject to customary conditions including the tendering of more than two-thirds of Arch Chemicals’ outstanding shares of common stock and clearance from antitrust regulatory authorities, the joint statement advised. Lonza plans to begin the tender offer by July 15 and to complete it later this year.
“This transaction represents an excellent strategic and cultural fit,” Lonza CEO Stefan Borgas said in the joint news release. “Lonza and Arch Chemicals offer highly complementary products and technologies, and together will be the global leader in controlling unwanted microbes. The business will enjoy a strong platform for accelerated future growth for the benefit of all our stakeholders.”
Michael Campbell, chairman, president and CEO of Arch Chemicals, said the transaction is a good fit because of the similarities between Lonza and Arch.
“We are pleased to have reached this agreement with Lonza, a company that knows our business well and shares our commitment to continuous improvement in innovation, operational excellence, safety and sustainability,” Campbell said. “We are confident that we have found the right strategic partner to help our business reach the next level of success.”
He added, “This compelling transaction offers Arch Chemicals shareholders a meaningful premium for their shares and will create exciting opportunities for Arch Chemicals employees while enhancing offerings for customers.”
Once the transaction is completed, Lonza will have “the world’s leading microbial control business with 2010 pro-forma sales in this life science market of approximately $1.6 billion,” the press statement cited. Lonza and Arch report the new business “will be ideally positioned to increase R&D and product development spending across its broader product portfolio.” The combined slate of products will be offered to customers in established and emerging markets.
According to the joint statement, “The hygiene, water treatment, materials protection and personal care segments are expected to be the key growth sectors for the combined business.”
Borgas said the acquisition of Arch Chemicals will allow Lonza to grow.
“... [It] is the next logical step in Lonza’s life science focused strategy,” Borgas said. “It will allow us to expand our non-pharma life science business to achieve a well-balanced profile based upon two world-leading growth businesses — pharmaceutical contract manufacturing and microbial control. The acquisition of Arch Chemicals will further strengthen our position in the attractive microbial control market. I am confident that this acquisition will create substantial value for our customers and thus for our employees and shareholders.”
The fastest growing markets for water treatment, hygiene, materials protection and personal care are considered to be North America, Europe and Japan. The fastest growing microbial control markets are reported to be Brazil, India, China and South Africa.
Arch Chemicals has 23 primary manufacturing and research facilities in North and South America, Europe, Asia, Australia and Africa. The company employs approximately 3,000 people. In 2010, Arch Chemicals had sales of approximately $1.4 billion, of which $1.2 billion were from microbial control products.
Lonza is headquartered in Basel, Switzerland.
