The $27.65-a-share bid for St. Louis-based Solutia represents a 42% premium from the company’s closing price on Thursday. Eastman agreed to pay $22 in cash and 0.12 share of its stock for each Solutia share.
Solutia, which formed after Monsanto (MON) divested its chemicals business in 1997, emerged from bankruptcy in 2008. The chemical maker is considered a leader in high-performance films used electronics and touch screens.
“The acquisition of Solutia is a significant step in our growth strategy and one that I am confident will strengthen Eastman as a top-tier specialty chemical company with strong, stable margins,” Eastman CEO Jim Rogers said in a statement.
When debt is included, the total transaction value rises to $4.7 billion.
Eastman Chemical, which was spun off from Eastman Kodak (EK) in 1994, said it sees the acquisition immediately adding to its non-GAAP earnings. Eastman now projects 2012 EPS of about $5.00, excluding merger-related costs and charges, and boosted its 2012 EPS view to greater than $6.00.
Eastman said it has found annual cost synergies of about $100 million that should be achieved by the end of 2013. The companies anticipate the deal will close in the middle of 2012.
“This complimentary transaction will accelerate the growth of our businesses around the world,” said Solutia CEO Jeffry Quinn. “The shared commitment to innovation, quality and technical service will allow us to better serve our customers and creates opportunity for our employees around the globe.”
Solutia also reported stronger-than-expected fourth-quarter non-GAAP EPS of 49 cents on a 7.6% increase in sales to $526 million.
Shares of Solutia surged 41.41% to $27.89 Friday morning. Even though acquirers often see their stocks fall after unveiling a deal, Eastman's shares rallied 9.19% to $51.45.