Albemarle, Rockwood courtship played out over 2 years

17:08 PM | August 28, 2014 | Robert Westervelt

Albemarle’s $6.2-billion acquisition of Rockwood Holdings was the result of an off-and-on 24-month courtship, according to a joint registration statement filed today by Albemarle and Rockwood. Discussions accelerated quickly in May and June as Rockwood M&A adviser Lazard pressed for bids and former Rockwood chairman and CEO Seifi Ghasemi prepared to retire from Rockwood to take on the top job at Air Products. Four other specialty chemical makers also expressed interest in all or part of Rockwood in recent months, according to the filing.

In May 2012, Albemarle chairman and CEO Luke Kissam made the first serious approach by expressing an interest in Rockwood’s lithium business at a dinner with Ghasemi. Both sides explored “possible strategic opportunities for the two companies, but no specific transaction was discussed.” Ghasemi and Kissam met again in August 2013. Rockwood then took the lead with a $72/share proposal to acquire Albemarle in September 2013 and a subsequent discussion about a merger of equals transaction between the two in February 2014. Both approaches were spurned by Albemarle.

Through the period, Rockwood  had announced plans to sell seven businesses since early 2013, leaving it focused on lithium and surface treatment. The total enterprise value of the completed and announced deals has been nearly $4 billion, including the sale of advanced ceramics business for €1.49 billion ($2.02 billion), clay-based additives for $635 million, and titanium dioxide (TiO2) pigments and other businesses for $1.30 billion. The sale of Rockwood’s TiO2 business to Huntsman is pending and expected to close by the end of September.

In May, with significant restructuring at Rockwood complete, Lazard contacted representatives of Albemarle and six other specialty chemical makers about interest in a deal with Rockwood. Albemarle stepped up and made an $85/share offer on 20 June. Albemarle, however, insisted that a transaction with Rockwood must be signed by mid-July as it was in final stages of a cash acquisition of another business and that it could not enter into both transactions. Lazard had days earlier outlined a 10-week process for bidding to Rockwood’s board, but Albemarle and Rockwood agreed to pursue a transaction on that timetable.

As part of the Lazard process, two of the companies approached indicated that they were interested in Rockwood’s surface treatment business but not lithium. Two other companies indicated that they were interested in all of Rockwood but would not be able to make an all-cash bid. One of the bidders, described as a “private, non-US entity,” proposed a deal in which non-public stock was utilized in part as acquisition currency. After Albemarle’s bid, Lazard was instructed to continue to advise other parties that they should respond quickly as Rockwood was evaluating other proposals.

On 8 July, one of the companies, referred to in the filing as Company C, proposed to acquire Rockwood for $80/share and said it expected it could complete due diligence and finalize documentation within six weeks. Lazard told Company C that another party had offered a higher price and asked Company C if it would be willing to increase its valuation and accelerate its timing. Company C acknowledged Lazard, but did not make another offer.

Albemarle and Rockwood, meanwhile, worked toward a deal with final negotiations between 11 July through 14 July. Both Rockwood and Albemarle boards approved the deal 14 July. In the early morning on 15 July, the deal was signed and both companies issued a joint press release announcing the deal before the market opened on 15 July.