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Kraton signs merger agreement with South Korea’s DL Chemical

Kraton signs merger agreement with South Korea's DL Chemical
Photo of Dan Smith (left) and Kevin Fogarty (right) courtesy of Kraton Corporation

Kraton Corporation, a leading global sustainable producer of specialty polymers and high-value bio-based products derived from pine wood pulping co-products, is being acquired by DL Chemical Co., Ltd. for USD2.5 billion in an all-cash transaction. The definitive merger agreement with DL Chemical Co., Ltd., a subsidiary of DL Holdings Co., Ltd. (formerly Daelim Industrial Co., Ltd.), which is considered one of the top and largest chaebol companies in South Korea, was announced yesterday.

Under the terms of the merger agreement, Kraton stockholders will receive USD46.50 in cash for each share of Kraton common stock they own.  As part of the transaction DL Chemical has conveyed that they have fully committed financing.

Kraton’s polymers are used in a wide range of applications, including adhesives, coatings, consumer and personal care products, sealants and lubricants, and medical, packaging, automotive, paving and roofing products. As the largest global provider in the pine chemicals industry, the company’s pine-based specialty products are sold into adhesive, road and construction and tire markets, and it produces and sells a broad range of performance chemicals into markets that include fuel additives, oilfield chemicals, coatings, metalworking fluids and lubricants, inks and mining.

Merger to support Kraton’s growth on a global scale

“Following an extensive review of a wide-range of strategic alternatives focused on maximizing value for the benefit of our stockholders, Kraton’s Board has determined that the sale of Kraton to DL Chemical is in the best interest of Kraton stockholders. We believe the transaction provides immediate and certain value for Kraton stockholders, and represents an attractive premium of approximately 50% over Kraton’s unaffected market valuation as of early July,” said Kevin M. Fogarty, Kraton president and chief executive officer. “Moreover, we believe DL Chemical has the industry presence and resources to continue to support the growth of Kraton’s business on a global scale.”

“Today’s announcement marks the culmination of the strategic review process for Kraton, resulting in a transaction that we believe provides significant value for Kraton stockholders.  In addition, we believe the scale and strength of the combined company will also benefit our customers and our employees, as it will expand Kraton’s global reach while creating a robust platform to further support investment in the existing innovation pipeline and provide for further expansion of sustainable offerings,” said Dan F. Smith, chairman of Kraton’s Board of Directors.

“DL Chemical has been conducting the petrochemical business responsibly within the DL Group for 46 years. After acquiring Kraton’s Cariflex business last year, we have successfully integrated that business within the DL Group,” said Sang Woo Kim, vice chairman and chief executive officer of DL Chemical. “We also have been highly interested in Kraton’s specialty polymer and bio-based chemical business, and this combination will allow us to provide our customers with a wider range of innovative products, while adding the ability to serve a diverse range of end markets in over 70 countries worldwide.”

Merger is expected to close in first half of 2022

The merger agreement has been unanimously approved by Kraton’s Board of Directors, which has recommended that Kraton stockholders vote in favor of the transaction. The acquisition is subject to certain customary closing conditions, including the receipt of stockholder and regulatory approvals. The deal is expected to close by the end of the first half of 2022.

J.P. Morgan Securities LLC is acting as exclusive financial advisor, and King & Spalding LLP is acting as legal counsel to Kraton in connection with the transaction. Goldman Sachs is acting as financial advisor, and O’Melveny & Myers LLP is acting as legal counsel to DL Chemical in connection with the transaction.