(By Balaseshan) Olin Corp. (NYSE:OLN), a maker of chlor alkali products, said it has agreed to buy privately-held bleach manufacturer K. A. Steel Chemicals Inc. for $328 million in cash to expand its capacity and to increase sales of other products.
Olin anticipates the transaction to be immediately accretive to both earnings and cash flow. Olin also expects to realize annualized synergies of about $35 million over the next three years.
Both parties have agreed to make an election under Section 338(h)(10) of the U.S. IRC that is expected to result in tax benefits to Olin with a net present value of about $60 million.
The acquisition of KA Steel increases Olin's capacity to manufacture bleach by about 20%, and provides a platform to increase the sales of other Olin produced, value-added products such as hydrochloric acid and potassium hydroxide.
The closing of the acquisition is conditioned upon regulatory approval and other customary closing conditions and is expected to occur by the end of the third quarter.
Olin's Chief Executive Joseph Rupp said the Lemont, Illinois-headquartered KA Steel's business, which is concentrated in the Upper Midwest, provides an excellent complement to the geographic profile of Olin's Chlor Alkali business.
KA Steel, which generated 2011 revenues of $435 million and adjusted EBITDA of $31 million, is one of the largest distributors of caustic soda in North America and one of the leading bleach manufacturers in the Midwest.
OLN ended Tuesday's regular session up 0.43% at $20.98. The stock has been trading between $16.11 and $23.46 for the past 52 weeks.