Honeywell's spin-off business segments are in talks to merge and plan to form a materials group with a market value of US$27 billion
Spinoff Sotis Advanced Materials is in merger talks with Element Solutions in a deal that could create a specialty chemicals giant valued at $270 billion, less than a year after it was spun off from the industrial conglomerate. Negotiations between the two companies on a merger of equals are still progressing and a deal could be finalized as soon as this week, people familiar with the matter said. However, relevant people also reminded that the two sides have not signed a formal agreement and there is still a risk of breakdown in the negotiations. This transaction is likely to be mainly a share exchange, with part of the cash payment. Sostis' share price has performed well since operating independently from Honeywell eight months ago, and this merger transaction can fully take advantage of its share price advantage. The company's shares were up 75% as of Thursday's close, giving it a market value of $12.7 billion. If this merger comes to fruition, the two parties will create a leading company in the high-end materials industry, with a total enterprise value including liabilities of approximately US$270 billion. After completing the integration with Element Solutions, Sotis's supply position in the high-end chip manufacturing material supply chain will be further enhanced. Sotis focuses on polymers, high-performance fluids and various industrial process materials; while Element Solutions focuses on special materials for the electronics, semiconductor and automotive fields. When Element Solutions released its latest financial report in April, it said that strong demand in the high-end electronics market drove its first-quarter net sales to $840 million, a 41% year-on-year increase. Element Solutions shares have risen 77% in the past year, with a current market capitalization of $10.6 billion. In recent years, the company has continued to carry out a number of small acquisitions to strengthen its presence in the semiconductor industry chain, including last year's $500 million acquisition of electronic conductive paste manufacturer Micromax. Sotis and Element Solutions did not respond to requests for comment.