Kraton Corporation KRA has entered into a merger agreement with a South Korean leading petrochemical company, DL Chemical Co., Ltd. (DL Chemical). DL Chemical will acquire 100% of Kraton for $2.5 billion in an all-cash deal.
Kraton’s merger decision is prudent to support its shareholders, as the company had been actively evaluating strategic options to maximize its shareholders' returns. Kraton’s shares have gained 9% since the announcement on Sep 27.
Kraton’s merger decision is a prudent step to support its shareholders as the company had been actively evaluating strategic options for maximizing its shareholders’ returns. The new entity will not only expand Kraton’s global footprint but also create a robust platform to support investments in innovation and increase its sustainable offerings. The deal is likely to close by the end of the first half of 2022.
DL Chemical is a subsidiary of DL Holdings Co., Ltd and has been operating the petrochemical business for 46 years. Last year, Kraton divested its Cariflex business to DL Chemical for $530 million.
Kraton is a leading global producer of specialty polymers and high-value performance products derived from renewable resources. As the largest global provider in the pine chemicals industry, the company's pine-based specialty products are sold to the adhesive, road and construction and tire markets. It produces and sells a broad range of performance chemicals.
Kraton generated revenues of $931 million and net income of $202 million in the first half of 2021. The company is also focused on reducing its debt levels. Its Polymer segment is gaining from the improved sales volume of specialty polymers, driven by demand recovery in consumer durables and automotive applications. Performance products sales volume is gaining from higher sales to the paving and roofing and adhesive applications. Kraton generated revenues of $1.5 billion in 2020.
Kraton is focused on driving its innovation-led growth and encouraging the adoption of sustainable pine chemical solutions by its customers, in order to replace hydrocarbons for the benefit of all stakeholders.
The company’s shares have gained 63.5% so far this year, outperforming the industry’s growth of 0.9%.
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Zacks Rank & Stocks to Consider
Kraton currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the basic materials space include The Mosaic Co. MOS, Veritiv Corp. VRTV and Avient Corp. AVNT. While Mosaic and Veritiv sport a Zacks Rank #1 (Strong Buy), Avient carries a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Mosaic has an estimated earnings growth rate of 472.9% for the ongoing year. So far this year, the company’s shares have appreciated 40.1%.
Veritiv has an estimated earnings growth rate of 215% for the current year. The company’s shares have soared 320.1% year to date.
Avient has a projected earnings growth rate of 75% for 2021. The company’s shares have gained 17.7% so far this year.
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