Eastman Chemical Company and Solutia Inc. announced that they have entered into a definitive agreement, under which Eastman will acquire Solutia, a provider in performance materials and specialty chemicals. Under the terms of the agreement, Solutia stockholders will receive $22.00 in cash and 0.12 shares of Eastman common stock for each share of Solutia common stock. Solutia shareholders will receive cash and stock valued at $27.65 per Solutia common share, representing a premium of 42% and a total transaction value of approximately $4.7 billion, including the assumption of Solutia’s debt.

The acquisition of Solutia is a significant step in our growth strategy and one that I am confident will strengthen Eastman as a top-tier specialty chemical company with strong, stable margins,” said Jim Rogers, chairman and chief executive officer of Eastman. “The addition of Solutia will broaden our geographic reach into emerging geographies, particularly Asia Pacific, establish a powerful combined platform with extensive organic growth opportunities, and expand our portfolio of sustainable products, all of which are consistent with our growth strategy.

Eastman and Solutia share several key fundamentals, such as complementary technologies and business capabilities, a polymer science backbone, similar operating philosophies and a high performance culture. In addition, the overlap of key end-markets is expected to provide opportunities for growth.

This acquisition is also a significant step in Eastman’s strategy to extend its global presence in emerging markets.

Eastman intends to finance the cash portion of the purchase price through a combination of cash on hand and debt. Debt financing has been committed by Citi and Barclays Capital, which are acting as financial advisors to Eastman on the transaction, and Jones Day is acting as legal counsel. Eastman’s management and Board of Directors remain committed to maintaining an investment grade credit rating and to its current annual dividend rate of $1.04 per share.

Deutsche Bank Securities and Moelis & Company acted as financial advisors to Solutia on this transaction. Perella Weinberg Partners acted as financial advisors to Solutia’s Board of Directors. In addition, the Valence Group, LLC conducted an independent evaluation of Solutia’s long-range plan for Solutia’s Board of Directors. Kirkland & Ellis LLP acted as legal counsel to Solutia.

Eastman is a provider of chemicals, fibers and plastics.