Element Solutions to Acquire Coventya for €420M; Shares Up 3.2%

Element Solutions Inc (ESI), a specialty chemicals production corporation, recently announced that it has made a binding offer to acquire Coventya Holding, a company that develops, manufactures and distributes specialty chemicals for the surface finishing industry. Following the news, shares of ESI rose 3.2% in Friday’s trading session.

The all-cash deal of €420 million is expected to close in the third or fourth quarter of 2021, subject to certain approvals.

Post the acquisition, Coventya will be added to MacDermid Enthone Industrial Solutions, a subsidiary of Element Solutions, and will be reported under the company’s industrial and specialty segment.

Coventya is expected to generate annual sales of €160 million and adjusted EBITDA of over €30 million for fiscal year 2021.

Element Solutions CEO Benjamin Gliklich said, “This acquisition should translate to positive outcomes for both companies, their customers and shareholders. We expect the acquisition to add approximately $0.07 to our annualized adjusted EPS before synergies, representing accretion of approximately 5% based on our previously announced adjusted EPS guidance of $1.30 for the full year 2021. Following the close of the transaction, we expect at least €13 million in annual synergies to be realized over the two years.”

“In our markets, opportunities this size are rare, and we are thrilled to have found one consistent with our acquisition strategy,” he added. (See ESI stock analysis on TipRanks)

Recently, Wolfe Research analyst Josh Silverstein initiated a Buy rating on the stock with a price target of $28 (13.6% upside potential).

According to Silverstein, the sector is well poised to recover from the pandemic-induced headwinds and ESI is likely to benefit from it.

The stock has a Moderate Buy consensus rating based on 2 Buys and 2 Holds. The average analyst Element Solutions price target of $25.25 implies 2.48% upside potential from current levels. Shares have gained 130.3% over the past year.

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