Belgian plastics and chemicals company Solvay said Monday it has made an offer to buy Paris-based chemicals firm Rhodia for euro3.4 billion ($4.84 billion) as it looks to expand in fast-growing emerging markets.
Rhodia SA's board of directors unanimously recommended the offer to its shareholders, Solvay SA said, adding that the combination will "accelerate the shared ambition to create a large global chemical company committed to sustainable development."
The Brussels-based company said the euro31.60-a-share bid represented a 50 percent premium to Rhodia's closing share price on Friday.
Rhodia's shared jumped almost 49 percent to euro31.28 in morning trading in Paris. Solvay's shares on the Brussels stock exchange added 3.2 percent.
Solvay said Rhodia's chairman and chief executive, Jean-Pierre Clamadieu, will become Solvay's deputy CEO and take over from Solvay's current CEO Christian Jourquin once he retires.
"The project presented today is a fantastic opportunity for Rhodia, for its employees and its shareholders," said Clamadieu. "By joining Solvay, we will accelerate the overall development of our business, capitalizing on a strong financial structure, our leadership positions, and an exceptional geographic footprint."
Rhodia has around 14,000 employees worldwide and generated sales of euro5.23 billion in 2010. It produces chemicals for vehicles, electronics, flavors and fragrances as well as health and consumer goods. Solvay said Rhodia is a leader in the market for specialty materials such as rare earths.
Solvay employs about 16,800 people and had sales of euro7.1 billion last year.
The chemicals industry suffered during the financial crisis, as some of the sectors it caters to, such as automobiles, saw their sales collapse. But with the recovery gaining steam, especially in emerging markets like China, chemicals are back in demand.
Solvay said it plans to expand in emerging markets, where the two firms already generate about 40 percent of their combined sales.
The Belgian company has been sitting on a mountain of cash since it sold its pharmaceuticals business to U.S.-based Abbott Laboratories for euro5.2 billion in 2009, so it had been expected to make a bid for another company sooner or later, said Jan Hein de Vroe, an analyst at ING.
Many analysts had thought the company would expand into a business with less overlap with its own activities, such as food ingredients, de Vroe said.
Solvay said it expects to save about euro250 million a year in costs within three years thanks to the takeover.