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Belgium's Solvay to buy US chemicals firm Cytec

Belgian chemical group Solvay will buy U.S. peer Cytec for $5.5 billion to boost its presence in lightweight composites for planes and cars and reinforce its mining chemicals business.

Cytec, which makes most of its sales in North America, has 4,600 employees worldwide and annual sales of about $2.0 billion.

It makes composite and adhesive materials for the aerospace and automotive industries and reagent chemicals used in the mining sector for mineral processing and solvent extraction.

Solvay said in a statement on Wednesday it would pay $75.25 per share for Cytec in cash, which closed at $58.39 on Tuesday.

Sebastien Bozon | AFP | Getty Images

The Belgian company said the enterprise value, which includes debt, was $6.4 billion, representing a 2015 estimated core profit (EBITDA) multiple of 14.7 times and of 11.7 times when considering potential synergies.

Solvay expects to make annual savings of 100 million euros within three years of the merger and added that Cytec would add to its earnings per share after the first year.

Jean-Pierre Clamadieu, CEO of Solvay, told CNBC Wednesday that choosing to buy Cytec was part of the next significant step for their business.

"We do believe that getting a position in aerospace – it's the second global supplier of advanced material into aerospace - is very attractive for a company like us."

"We have a small position in aerospace, but the willingness to become much stronger, and Cytec gives us this opportunity."

The Belgian group will finance the transaction with a 1.5 billion euros ($1.66 billion) rights issue, 1.0 billion euros of hybrid debt instruments and a senior debt issue.

However, market-watchers have questioned whether the Belgium firm is paying too much for the Cytec deal, however Clamadieu remained positive that it would be worth it.

"We think that we are paying a significant (multiple), because we think that the growth opportunities at Cytec are very significant."

"This is a great opportunity for us to get a position in a market that we consider very attractive for a chemical company like ours, who are developing specialty materials."

Solvay also announced its second quarter results on Wednesday. Core profit, adjusted for one-off items rose 8.1 percent in the second quarter to 500 million euros, in line with the 499 million expected in a Reuters poll of seven analysts.

The company said its speciality materials and chemicals businesses gained, but demand declined substantially for chemicals used in the oil and gas sector.

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