Back to top

Analyst Blog

Eastman Chemical Company’s (EMN - Analyst Report) impending purchase of Missouri-based chemical company Solutia Inc. has been cleared by the latter’s shareholders. This follows the approval of the deal by the European Commission in May 2012. Roughly 99% of the shareholders, who voted in a special meeting, approved the deal.  

With all regulatory conditions have been met, the transaction now remains subject to the satisfaction or waiver of certain customary closing conditions. The acquisition is expected to consummate in the first week of July.

Eastman, in January 2012, landed a cash and stock deal worth $3.4 billion to acquire Solutia, a global leader in performance materials and specialty chemicals. The move is a part of the company’s expansion strategy. Per the agreement, Solutia stockholders will receive $22.00 in cash and 0.12 shares of Eastman common stock for each Solutia share.

Solutia registered around 30% of sales in 2011 from Asia-Pacific. Eastman believes that the takeover will help it to expand its foothold in China. The company envisions the transaction to immediately add to its earnings.

Annual cost synergies are expected to be roughly $100 million by 2013. Moreover, Eastman expects to realize significant tax benefits from the acquisition. It also recognizes the potential for meaningful revenue synergies by leveraging both companies’ technology and business capabilities and overlapping end-markets, particularly in automotive and architecture.

Eastman's diversified chemical portfolio, along with its integrated and diverse downstream businesses, is driving earnings. The company benefits from business restructuring and cost-cutting measures. It has sold unprofitable units and closed down the poorly performing ones.

Eastman expects the global economy to grow slowly while volatility in raw material and energy costs to subside in the near-term. The company expects earnings to be roughly $5.30 a share in 2012. It expects to benefit from the increased capacity additions as well as the Solutia acquisition.

Eastman, which competes with The Dow Chemical Company (DOW - Analyst Report) and E. I. du Pont de Nemours and Company (DD - Analyst Report), holds a short-term Zacks #2 Rank (Buy). We currently have a long-term Outperform recommendation on the stock.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%