History only offers us one version of events, so it’s difficult to know whether, if given the opportunity to do so again, management at Synthomer (SYNT) would still agree to pay $1bn (£760mn) for US chemicals company Eastman’s (US:EMN) adhesive resins arm. And, if they would, whether they’d have looked to have financed it more conservatively.
Tip style
Value
Risk rating
High
Timescale
Medium Term
Bull points
- Shares at historic discount
- Asset sale strengthens balance sheet
- Focus on higher margins
- Strategic buyer in the wings
Bear points
- Weak earnings
- Covenant breach
When the British firm agreed to acquire the division in October 2021, it was still digesting the $824mn purchase of competitor Omnova, completed around 18 months earlier, which it funded through a five-year, €520mn (then £437mn) bond issue.