Chemical Finance Digest, Jan. 23-27

Topping the headlines last week, Eastman Chemical will acquire Solutia for $4.7 billion in cash and stock, including assumed debt. The $27.65/share deal values Solutia at a 42% premium over its closing price on January 26. Eastman expects to issue $3.5 billion in debt to finance the deal, along with $700 million in new stock to Solutia shareholders. The combined company will have revenues of about $9 billion/year.

Fourth-quarter earnings reports were mixed at diversified and commodity chemical firms, while specialties companies generally beat estimates. DuPont’s results were negatively impacted by destocking, while industrial gases firms had solid fourth-quarters.

U.S. Silica will launch a $243.5-million IPO this week. The offering values the company at $16-$18/share, and proceeds will mostly go towards compensating Golden Gate Capital, the private equity firm that bought U.S. Silica in 2008.

In M&A news, South Africa’s competition commission has blocked the acquisition of Cellulose Derivatives, a technical-grade carboxymethyl maker, by a unit of AECI.

Tronox is planning to issue $550 million in new debt in the form of a term loan. The loan will refinance the company’s existing loan, and has been rated ‘Ba2’ by Moody’s and ‘BB’ by Standard & Poor’s (S&P). Meanwhile, both ratings agencies affirmed Eastman’s current rating in the wake of the Solutia deal. “We believe the transaction, if consummated as currently structured, will result in a strong business risk profile and significant financial risk profile,” says S&P.

In macroeconomic news, U.S. GDP grew at a 2.8% rate in the fourth-quarter, driven by inventory accumulation. “The fourth-quarter GDP data don't show the recovery ‘taking off.’ It's consistent with continued, but gradual improvement. We expect growth of around 2% in the first quarter, and also around 2% for 2012 overall,” says IHS Global Insight economist Nigel Gault.

The week ahead will see more big fourth-quarter earnings reports. The highlights (fourth-quarter consensus in parentheses, courtesy Thomson Reuters):

Tuesday: Celanese (62 cts/share); Cytec (47 cts/share).
Wednesday: Cabot (55 cts/share); W.R. Grace (87 cts/share).
Thursday: Dow Chemical (30 cts/share).