Cosmos will acquire DSM's leading sustainable coating resin business.

On September 30, 2020, Covestro signed an agreement with royal DSM to acquire its resin and functional materials business (RFM). By expanding into the highly promising market for sustainable coating resins, Cosco is taking an important step in its long-term corporate strategy to further drive business growth through sustainability and innovation. The integration of RFM will add approximately EUR 1 billion in sales and EUR 141 million in EBITDA (as expected in 2019) to its coatings, adhesives and specialty chemicals (CAS) business unit, which will increase sales by more than 40% to approximately EUR 3.4 billion (as expected in 2019)This acquisition will enable Cosco to become a leading supplier of sustainable coating resins, resulting in an extremely comprehensive and innovative product portfolio that creates a strong customer value proposition. Cosco has agreed to buy for 1.61 billion euros and will raise capital in combination with equity and debt.
, chief executive of Cosco Ventures, said: "It's very "This acquisition is an important step in our corporate strategy," said Markus Steilemann. RFM will grow our business. By combining our strong innovation capabilities, sustainable product portfolio and complementary technologies and customer industries, we are bound to create great value. At the same time, it is a key step in driving innovation towards a circular economy.
integration of complementary technologies and customer industry coverage
RFM will create a larger, more technically capable business area that will benefit existing and future customers and employees through this stronger growth platform. Cosco is already one of the leading manufacturers of water-based polyurethane dispersions. With the acquisition of RFM, Cosmodry will add a full range of water-based polyacrylate resins and further enrich its technology portfolio, including a wide range of water-based technologies, powder coating resins and radiation-cured resin technologies. RFM owns strong brands in sustainability® including Niaga, material manufacturing, and advanced solar anti-reflective coatings.
acquisition has diversified Cosco's business and significantly strengthened the company's position in attractive, high-growth markets. For example, Cosmos will become one of the leading suppliers of fiber optic coatings, a market area with great potential for the future, including future 5G technology, and Cosco will further expand into the attractive high-growth area of 3D printing materials, which is growing at an average annual rate of more than 20%. In addition, by optimizing its global business layout, Cosco will further narrow its reach to customers in all key markets and add more than 20 new bases to its global production network.
both sides are committed to achieving ambitious ESG (Environmental, Social and Governance) goals and have excellent and complementary research areas, particularly in the field of sustainable high-performance coating raw materials. The combination of the two will make Cosco more innovative in the field of coating resins and become a more attractive research and development partner for its customers. Therefore, in the face of the integrated customer industry, Cosco will be committed to innovation, continue to promote sustainable development, faster transition to a circular economy.
great potential for value creation
by integrating RFM into Cosco's CAS business unit, it will create significant opportunities to add value to our business. Cosco estimates that long-term synergies are expected to generate value of around 120 million euros per year by 2025 when full integration is completed. These include about two-thirds cost synergies and one-third revenue synergies, which will result from the integration of procurement, sales and administrative structures in the business, as well as cross-selling and joint development of high-performance new products.
Attractive valuation and financing structure
Taking into account RFM's cash equivalents, the total acquisition value of EUR 1.61 billion is equivalent to approximately EUR 1.55 billion in net corporate value, which means that RFM's valuation is approximately based on 5.7 times the 2021 EV/EBITDA (Economic Value Profit Ratio), including projected synergies. If synergies are not taken into account, they will be 10.3 times EV/EBITDA. Cosco plans to refinance through a combination of equity financing, debt financing and its own cash to secure the funds needed for the acquisition. This is in keeping with the company's commitment to maintaining a robust investment rating. To this end, Cosco plans to use its existing registered shares to raise about 450 million euros.
" is a great opportunity for us, both strategically and financially, to advance our long-term growth strategy with compelling conditions and clear synergies. Through the selected financing structure, we have achieved the right balance between equity financing and debt financing. "Dr. Tao Pengfei, Chief Financial Officer and Chief Executive Officer of Cosco Ventures, Thomas Toepfer said, "We look forward to welcoming new colleagues to the Cosco family as soon as possible." Together, we will realize our common potential. The
is expected to close in the first quarter of 2021 and require regulatory approval, including antitrust approval.
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