Growth Spurt: LANXESS Makes Acquisitions to Enter New Markets

Some companies struggle to achieve growth. LANXESS doesn’t struggle to grow. Instead, this Pittsburgh-based specialty chemical company acquires other companies and businesses at a hefty pace to supplement its organic growth. And this plan is working quite well.

“Despite the pandemic and unstable market conditions, LANXESS has been able to grow strategically – both organically and through several significant acquisitions over the past year – to deliver high-quality products to our customers while opening up access to additional markets,” said Dr. Antonis Papadourakis, President & CEO, LANXESS Corporation.

In 2021 alone, the company acquired four firms, including: Emerald Kalama Chemical, manufacturer of aroma chemicals and preservatives used in flavors, fragrances, foods, cosmetics and other consumer products; Theseo, a producer of disinfection and hygiene solutions; and INTACE, which manufactures biocides and antimicrobials. And pending regulatory approval, the planned acquisition of International Flavors & Fragrances’ (IFF) Microbial Control business, LANXESS’s latest and largest acquisition, stands as one of the leading suppliers of antimicrobial active ingredients and formulations for material protection, preservatives and disinfectants. Papadourakis remarked, “It has been a pleasure to welcome so many new colleagues across several sites, and our teams are thrilled to be a part of such a transformative time in our company's history as we’ve launched a Flavors and Fragrances business unit within our Consumer Protection segment.

“The LANXESS team has a lot of experience with this type of growth, and understands what it takes to integrate new employees, locations and business practices. Going back just a few years to the company's largest acquisition to date was Chemtura. Our teams are well versed in bringing together assets to ensure that the LANXESS standard is applied for health, safety and environmental protection measures across the board,” emphasized Papadourakis.

He pointed out that by bringing LANXESS colleagues together to learn from each other, while immersing everyone within the company’s Performance Culture and corporate values, there’s a very bright future ahead for LANXESS.

In 2021, all signs are pointing to growth – especially here in the United States. Finalizing the acquisition of Emerald Kalama Chemical in August, LANXESS products can be found in many of the top branded personal-care products, detergents, cosmetics and exclusive fragrances, as well as food and beverages.

The product range in the new LANXESS portfolio includes more than 30 aroma chemicals that provide earthy, floral, fruity, spicy and herbal notes. LANXESS is incorporating this business into the newly established Flavors & Fragrances business unit, which will become part of the Consumer Protection segment.

“The LANXESS team has a lot of experience with this type of growth, and understands what it takes to integrate new employees, locations and business practices. Going back just a few years to the company's largest acquisition to date was Chemtura. Our teams are well versed in bringing together assets to ensure that the LANXESS standard is applied for health, safety and environmental protection measures across the board,” emphasized Papadourakis.

The planned acquisition, IFF’s Microbial Control business, marks LANXESS’s second largest acquisition ever, a title that the Emerald Kalama Chemical buy also held for a brief time.

This acquisition – when finalized – will make LANXESS a leading supplier of microbial-control products. Both companies signed a corresponding agreement, with finalization expected early in 2022. IFF Microbial Control is one of the leading suppliers of antimicrobial active ingredients used in many applications, from personal care and household products to industrial water treatment, paints and coatings.

The IFF Microbial Control business represents sales of around $450 million and in earnings before interest, taxes, depreciation and amortization (EBITDA) of approximately $100 million. Within four years after closing the transaction, LANXESS expects synergies to add approximately $35 million (EUR 30 million) in earnings before EBITDA.

“This business fits ideally into the strategic direction of LANXESS –- specialty chemicals with attractive margins, applications in a wide range of industries and with a global positioning. At the same time, the company is enhancing Consumer Protection to become the strongest segment in the group and is once again, LANXESS is taking a decisive step forward in terms of profitability and stability,” said Matthias Zachert, Chairman of the Board of Management of LANXESS AG.

“Considering the synergies we are aiming for, we are achieving an attractive purchase price of 9.6 times earnings before EBITDA,” said LANXESS CFO, Michael Pontzen. “The company will finance the purchase price with debt capital and has secured respective bridge financing for this purpose."

Pontzen also pointed out that LANXESS will replace the bridge-financing agreement with its banks in the coming months by placing corporate bonds in the capital market. “In doing so, maintaining our solid, investment-grade rating is of great importance to LANXESS,” he said.

In North America, the recent acquisitions will add to LANXESS’s production footprint – with Emerald Kalama’s sites in Vancouver and Kalama, Wash. and the IFF Microbial Control facilities in St. Charles, La. and Institute, W.Va. – as well as the employee base. Completing the acquisition of Emerald Kalama earlier this year added about 300 U.S. employees (about 500 globally), while the pending IFF deal will bring on another additional 270.

“Also, thanks to acquisitions in recent years, we are already well positioned as a microbial control solutions provider. With IFF’s microbial-control business, we can now expand our portfolio of active ingredients, enabling us to offer our customers additional application-oriented solutions. In addition, we are strengthening our value chain,” said Michael Schaefer, head of the Material Protection Products business unit.

He added that the business also gives LANXESS access to new technologies and enhances the company’s regulatory position through additional registrations.

High Rank in Global Market

IFF Microbial Control business offers a comprehensive portfolio of innovative and sustainable solutions. These extend the life and ensure the functionality of end products, for example in paints and coatings, personal care products, detergents and household cleaners. Microbial control products also preserve water in industrial applications. In addition, hygiene solutions are also used in functional textiles. They ensure that these textiles remain germ free for a longer time.

LANXESS is a leading, specialty-chemicals company based in Cologne, Germany, with 25 production sites in the U.S., along with offices in Pittsburgh, Shelton, Conn.,  and Vancouver, Wash. With about 14,800 employees in 33 countries, the company is well established on the global market.

The company’s primary expertise lies in producing, developing and marketing chemical intermediates, and additives, with 2020 sales turnover of 6.1 EUR or $7.3 billion. LANXESS manages its operating business through four segments – Advanced Intermediates, Specialty Additives, Consumer Protection, Engineering Materials and 11 business units, through which the company works with a broad range of applications markets. As a specialist and efficient partner, LANXESS offers solutions to the challenges our customers face.

The company focuses on customers’ requirements to drive progress and reliably provide innovative product, material and service solutions. When developing materials, LANXESS also works with artificial intelligence to reduce development times for its customers. Its manufacturing, administration and logistic processes are designed efficiently and with a focus on performance. Sustainability and responsibility are key factors behind the successful business operations of LANXESS. These help LANXESS become an even more efficient and competitive company while also supporting social goals such as protecting the environment. The company’s products also play a role in this, providing sustainable solutions such as electric mobility.

Protecting the Environment Is Uppermost Consideration

LANXESS has long emphasized a focus on quality as the greatest asset and highest priority, holding its employees, suppliers and service providers to stringent practices.

LANXESS takes care of the environment – evidenced by its aggressive goal to be carbon neutral by 2040, already reducing its emissions by half since the company’s inception in 2004. The company also boasts a strict observance of safety, environmental and social standards at its locations that span 33 countries around the world.

The company is highly focused on sustainability across its operations, participating in a variety of initiatives, such as Responsible Care® and the Carbon Disclosures Project, earning repeated inclusion in many critical indices like the Dow Jones Sustainability Index World & Europe and FTSE4Good, which rank companies based on their safety, health and environmental protection efforts.

With lofty goals and tremendous momentum to meet them, LANXESS is taking the next steps toward assuring even greater growth – through enhanced production and acquisitions – and more efficient and sustainable operations worldwide.