Friday, September 27, 2013
DJ: Carbon Fiber Leader Toray To Buy US Zoltek for $584mn
TOKYO--Toray Industries Inc. (3402), which holds the biggest global share of the carbon fiber market, has agreed to buy smaller rival Zoltek Companies Inc. (ZOLT) for $584 million, in a move to tap into growing demand for less-expensive fiber used in car production and alternative energy technology.
St. Louis-based Zoltek and Tokyo-based Toray each specialize in different types of carbon fiber production. Zoltek produces large tow carbon fiber materials, which are commonly used in wind turbine blades and automotive parts, while Toray produces higher-end carbon fiber materials used in fuel-efficient jetliners flying long-haul routes.
The Japanese synthetic fiber maker said it will set up a special purpose company in the U.S. to buy an entire stake in Zoltek for $16.75 per share. Noting its board of directors unanimously approved the transaction, Zoltek said in a press release that the parties are targeting a late 2013 or early 2014 closing subject to conditions such as receiving both shareholder and regulatory approval.
The move will help solidify Toray's position as the top provider of carbon fiber in the global market, by allowing it to expand into areas it isn't involved in.
"Under its unique marketing strategy distinguished from that of regular tow manufacturers, Zoltek has recently realized outstanding growth in its business," Toray, which provides carbon fiber materials to Boeing Co.'s new 787 Dreamliner, said in a statement.
Demand for carbon fiber materials, which are lighter and stronger than sheet steel and aluminium, has started to pick up again after orders slumped in the wake of the global financial crisis.
Toray said global demand for carbon fiber is expected to grow at an annual pace of at least 15%, with demand coming not only from lightweight jets but also from much broader applications such as in the mass-production of vehicles as well as industries related to alternative energy.
Zoltek's shares surged 12.7% to $18.51 in trading on the Nasdaq after a media report on the deal emerged. In trading on the Tokyo Stock Exchange, shares of Toray were up 2.4% at Y649 midday, outperforming a 0.2% fall in benchmark Nikkei Stock Average.
"As Toray's strength is in high-end carbon fiber, Zoltek's strength in low-end carbon products will offer advantageous synergy effects. Demand for carbon fiber in a mid-price range will likely rise as the demand from the automobile industry will likely increase in the future," said Mitsushige Akino, fund manager at Ichiyoshi Asset Management. "Also as the purchase amount is relatively small, Toray should be able to finance the deal on its own," he added.
By its own estimate, Toray held the biggest share of the global market at 31% in 2011. Its smaller domestic rivals include Teijin Ltd. and Mitsubishi Rayon Co.