January 27, 2012 5:47 PM

Jones Day, Kirkland Advise on Eastman Chemical's $4.7 Billion Solutia Buy

Posted by Tom Huddleston Jr.

UPDATE: 1/27/12, 6:30 p.m. EST. Lawyers at Davis Polk & Wardwell are advising Citigroup Global Markets and Barclays Capital in their roles as joint lead arrangers and physical bookrunners of a $3.5 billion bridge loan facility for Eastman Chemical in connection with the acquisition of Solutia. Corporate partner Jason Kyrwood is leading Davis Polk's team.

Eastman Chemical Company is planning to purchase specialty chemicals manufacturer Solutia Inc. in a $4.7 billion deal, including debt, that will allow the former Eastman Kodak subsidiary to expand its Asian Pacific operations over the next several years.

Terms of the agreement, which was announced Friday, call for Eastman Chemical to pay $22 in cash and 0.12 of its own shares—a 42 percent premium over Solutia's Thursday closing price—in exchange for each share of Solutia, or roughly $3.38 billion. Adding in assumed debt, the deal has a total value of $4.7 billion.

St. Louis–based Solutia makes polymers and plastics used in such products as the safety glass found in automobiles and buildings.

Eastman Chemical formed in 1994 when it was spun out from Eastman Kodak, which filed for bankruptcy last week. While its former parent has foundered, the onetime subsidiary has found success on its own, with revenue increasing 23 percent to $7.2 billion last year. The company said in its announcement that it would use the acquisition of Solutia, which has a regional headquarters in Shanghai, to increase its business in the Asia Pacific market by 10 percent a year "for the next several years."

Kingsport, Tennessee–based Eastman Chemical turned to longtime counsel Jones Day—which Kodak recently replaced as restructuring counsel in favor of Sullivan & Cromwell—to handle the Solutia transaction. Jones Day's team on this deal is being led by M&A partner William Rowland in Atlanta. Rowland has represented Eastman Chemical on a number of past transactions, including last January's $600 million sale of Performance Polymers PET to DAK Americas.

Other Jones Day lawyers working on the deal include M&A partners Lizanne Thomas, William Zawrotny, and Bryan Davis. Also advising from Jones Day is capital markets partner Mark Hanson, banking and finance partner Robert Graves, compensation and benefits partners Rory Lyons and Travis DeHaven, tax partner Jerry Smith, and antitrust partner Bruce McDonald. Theresa Lee is Eastman Chemical's chief legal officer.

Kirkland & Ellis is acting counsel to Solutia on the matter, with New York–based corporate partners David Fox and William Sorabella leading the firm's team. Paul Berra III is general counsel for Solutia.

Last year, Kirkland advised Solutia on its $326 million acquisition of Etimex Solar, which makes chemicals for solar panels.

Skadden, Arps, Slate, Meagher & Flom is advising Deutsche Bank Securities and Moelis & Company in their roles as financial advisers to Solutia on the transactions. Private equity partner Eileen Nugent is leading Skadden's team.

Eastman Chemical said in its announcement that earnings per share would increase from $5 in 2012 to $6 next year—excluding costs related to the Solutia acquisition—and that it expects to add cost savings of nearly $100 million annually by the end of 2013 as a result of the transaction. Both companies' boards have approved the deal, which is expected to close by the middle of the year pending regulatory approvals.

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