Hexpol grows through acquisition

Polymer group Hexpol AB (STO: HPOL B) has agreed to acquire leading German thermoplastic elastomers (TPE) company Horst Müller Kunststoffe GmbH & Co. KG from Rowa Group Holding GmbH. Hexpol is paying 39 million Euros in cash for the company with an annual turnover of around 46 million and 90 employees.

Müller Kunststoffe was established in 1965 and has developed a sound reputation in soft-thermoplastic compounding. The company has two production plants in Schney district in Lichtenfels, Bavaria, Germany and makes TPE, Soft-PVC and cork compounds used in automotive, leisure, electronic, hygiene products, construction and toy industries.

Hexpol (then Hexagon Polymers AB) was listed in 2008 as a spin-off from Hexagon AB. Swedish businessman Melker Schörling through his investment company Melker Schörling AB currently owns over 26% of shares and over 46% of voting rights in Hexpol. Hexpol has two separate business units: Hexpol Compounding and Hexpol Engineered Products. Müller Kunststoffe further enhances the offering in Compounding.

Hexpol is focusing on markets where it foresees the opportunity to reach leading market position. Its current product offering includes advanced polymer compounds, plate heat exchanged gaskets and wheels out of polyurethane, plastic and rubber materials for forklifts and for castor wheel applications. Hexpol has production units in nine countries and has recently invested heavily in expanding its production in China; following an expansion of Hexpol Elasto in Foshan to enable TPE compound production there with a decision to build a new rubber compounding production line in Qingdao.

Hexpol’s stock gained around 10% in the last week, with bulk of the gains coming after the announcement on Thursday. The company expects the acquisition to have a positive impact for earnings from the start, despite slightly lower margins for Müller Kunststoffe compared to Hexpol Group. Hexpol’s management foresees synergy benefits from both production and sales. The acquisition is subject to regulatory approvals and Müller Kunststoffe is expected to be consolidated from January 2012.