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Honeywell spin-off Solstice Advanced Materials is in talks to merge with Element Solutions, potentially striking a deal that would create a $27bn speciality chemicals giant less than a year after breaking off from the industrial conglomerate.
Discussions between the two companies over a merger of equals are ongoing, but a deal could come together as soon as this week, said people familiar with the talks. They warned that a formal agreement had not been reached and talks could still fall apart.
The deal, which is likely to be mostly stock-based and include some cash, would allow Solstice to take advantage of its strong share price performance since breaking away from Honeywell eight months ago. The stock is up 75 per cent, giving Solstice a market value of $12.7bn at Thursday’s close.
The potential merger would create a market leader in the advanced materials sector, with a combined enterprise value of roughly $27bn, including debt.
A combination with Element would boost Solstice’s role as a supplier of advanced chipmaking materials. Solstice makes everything from polymers and performance fluid to process materials used by industry, while Element focuses on materials used in electronics, semiconductors and the automotive sector.
In its latest earnings update in April, Element highlighted robust demand from the “high-end electronics market”, pushing net sales for the first quarter to $840mn, up 41 per cent on the same period last year.
Shares in Element have increased 77 per cent over the past year, giving it a market capitalisation of $10.6bn. Element has struck a series of smaller deals in recent years to bolster its presence in the semiconductor supply chain, including buying Micromax, a maker of conductive pastes for electronics, for $500mn last year.
Solstice and Element did not immediately respond to requests for comment.
Solstice chief executive David Sewell told investors in February that future dealmaking was “certainly on the table”.
“What we’re really grateful for is to have such a strong balance sheet, and since our spin we’ve really started to develop a robust M&A pipeline,” said Sewell on a first-quarter earnings call.
The transaction would come amid a boom in dealmaking, with a record 47 transactions valued at more than $10bn in the first half of the year, helping to push global dealmaking volume to $2.8tn, according to LSEG.
Solstice’s public listing was the first part of Honeywell’s complex break-up. The $135bn industrial giant last month split into two publicly traded companies: one focused on aerospace and the other on automation.
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