Chemtura Bankruptcy and Lanxess Acquisition: A Comprehensive Overview

Chemtura's financial struggles led to a significant turning point in the company's history. In 2012, Chemtura filed for Chapter 11 bankruptcy protection.

The bankruptcy filing was a result of the company's substantial debt burden, which had grown significantly over the years. Chemtura's financial struggles were further exacerbated by the decline of its core business.

Chemtura's acquisition by Lanxess was a direct consequence of the bankruptcy filing. Lanxess, a German-based chemical company, acquired Chemtura's assets and operations to expand its portfolio.

Lanxess' acquisition of Chemtura marked a significant shift in the company's strategy and operations.

Related reading: Riteaid Bankruptcy

Chemtura filed for bankruptcy protection for its US operations on March 18, 2009, by filing voluntary petitions for relief under Chapter 11 of the U.S. Code.

The company's bankruptcy proceedings were complex, involving the U.S. Department of Justice filing proofs of claim on behalf of the U.S. Environmental Protection Agency and the National Oceanic and Atmospheric Administration.

See what others are reading: Phoenix Coyotes Bankruptcy and Sale

Chemtura's plan of reorganization was confirmed by the Bankruptcy Court on November 3, 2010, and the effective date of the plan occurred on November 10, 2010.

The company had been struggling with reduced liquidity and was unable to sell enough assets to raise cash for its debt obligations, leading to the bankruptcy filing.

Chemtura obtained a commitment for $400 million in debtor-in-possession financing from Citigroup, which helped the company continue its operations during the bankruptcy process.

The bankruptcy filing was a result of the company's efforts to increase liquidity, including the potential sale of a business, but ultimately determining that a court-supervised restructuring was the best course of action.

LANXESS successfully completed the acquisition of Chemtura, a US-based specialty chemicals company, in April 2017.

The acquisition was worth EUR 2.4 billion, making it LANXESS's largest takeover to date.

Chemtura's shareholders voted to approve the acquisition in February 2017, with LANXESS financing the deal through corporate bonds, a hybrid bond, and cash.

Recommended read: Acquisition of the May Department Stores Company by Federated Department Stores

The acquisition significantly expanded LANXESS's additives portfolio, making it one of the world's leading players in this growth field.

LANXESS absorbed Chemtura's 2,500 employees at 20 sites in 11 countries worldwide.

Chemtura's former businesses generated annual sales of approximately EUR 1.5 billion.

LANXESS's Chairman of the Board of Management, Matthias Zachert, stated that the acquisition was a major step in the company's realignment process and a significant milestone in its course of growth.

The acquisition increased LANXESS's footprint in North America, with the company now represented at 24 production sites and employing approximately 2,800 staff.

LANXESS financed the acquisition through two corporate bonds and a hybrid bond as well as cash.

The acquisition is expected to be accretive to LANXESS's earnings per share in the first full fiscal year after closing.

The expected annual synergy effects from the transaction amount to approximately EUR 100 million with realization targeted until 2020.

LANXESS offered $33.50 per share for Chemtura, a premium of about 19 percent to the Philadelphia-based company's share-price close on Friday.

You might like: Round 2 (company)

The deal was part of LANXESS's push to diversify away from its main synthetic rubber business.

LANXESS's new core business includes highly specialized substances such as ingredients for drugs and pesticides, leather-tanning chemicals, construction pigments for concrete and roofing tiles, and water treatment chemicals.

The Chemtura deal will help LANXESS boost its industrial lubricant additives and flame retardant additives businesses.

LANXESS secured bridge financing for the transaction, which will quickly be refinanced via senior bonds and a hybrid bond.

Recommended read: PS Business Parks

Chemtura has entered into settlement agreements with the EPA to resolve environmental concerns at various sites. The Multi-Site Settlement is one such agreement.

The Multi-Site Settlement affects multiple sites, including the Beacon Heights Landfill Superfund Site in Connecticut and the Bio-Lab Inc. facility in Georgia. These sites will receive a share of the approximately $30 million recovery from the settlement.

A total of 17 sites will benefit from this settlement, including the Gowanus Canal Superfund Site in New York and the Central Chemical Superfund Site in Maryland. The sites are listed below:

Chemtura is also required to pay a civil penalty of approximately $785,000 as part of the Multi-Site Settlement. This penalty will be deposited in the U.S. Treasury.

The Multi-Site Settlement has a significant impact on several sites across the United States.

Chemtura continues to be responsible for its obligations relating to the Laurel Park, Inc. Superfund Site and Chemtura-owned/operated sites.

A total of $30 million will be recovered and divided among the affected sites. This recovery is a result of the Multi-Site Settlement and the Gowanus Site Settlement.

Here are some of the sites that will receive a share of the recovered funds:

More site-specific information can be found on the Chemtura EPA funded sites and communities web page.

A civil penalty can be a significant component of a settlement agreement. In the Multi-Site Settlement, the payment of approximately $785,000 was made to resolve EPA's claim against Chemtura for civil penalties.

This payment was included in the overall $26 million figure mentioned in the settlement. It was made to resolve alleged violations stemming from a May 2004 fire at Chemtura's Bio-Lab, Inc. facility in Conyers, Georgia.

The civil penalty was imposed under various federal laws, including CERCLA, CAA, CWA, and EPCRA. The penalty funds will be deposited in the U.S. Treasury.

If this caught your attention, see: Heartland Payment Systems