Chemtura Corporation (NYSE: CEM), a chemical company, is the result of a merger of Crompton Corporation and Great Lakes Chemical Corporation back in 2005. Since then, the company has been "right-sizing" and "right-shaping" its organization with divestitures as well as more acquisitions. Some of the company's core competencies include plastic additives, seed treatments, pool and spa products, and urethane polymers.
Well, according to a report in The Wall Street Journal [subscription], it looks like The Blackstone Group LP (NYSE: BX) and Apollo Management LP are interested in purchasing Chemtura. True, it sounds like the talks are preliminary; but at the same time, private equity firms are hungry for deals, especially for valuations of $2 to $4 billion.
Blackstone and Apollo are highly experienced in the chemical space, and have had fairly good success. If anything, Chemtura is likely to find synergy with other portfolio companies.
However, a key hurdle is the operating performance of Chemtura. In Q1, the company posted a loss of $21 million or $0.09 per share. Simply put, it's been tough to deal with commodities inflation.
Although there is a silver lining; the crop protection business. The unit posted a 50% spike in operating income.
More importantly, Wall Street is taking the deal-talk seriously. In today's trading, Chemtura's stock is up 8% to $8.44.
Tom Taulli is the author of various books, including The Complete M&A Handbook
Closing Bell: When We All Love the PIIGS (NBG, SQNM, PG, ERTS, KO)
Serious Money: Cheapest Stocks List Shrinks from 26 to 21
Chasing Value: Hasbro Earnings Makes My Point
