Japanese carbon fibre maker Toray Industries acquires US rival Zoltek for $584 mn

Japan's Toray Industries Inc, a global leader in carbon fibres whose product is used extensively in Boeing 787 aircraft, has agreed to acquire US rival Zoltek Companies Inc for approximately $584 million in an all-cash deal, planning to enter into large-tow carbon fibre business.

Under the terms, Toray will buy all the outstanding shares of Zoltek for $16.75 per share which is marginally above the closing price of $16.43 for the stock Wednesday on Nasdaq. Further to the announcement of the deal, the stock surged 13 per cent to close at $18.51 yesterday.

Carbon fibre is a high-tensile strength low-weight material used in aircraft and spaceship parts, racing cars, automobile springs, sailboat masts, wind turbines and many other applications. The composite materials are made of thousands of long thin carbon fibers of about 5 to 10 microns in diameter which are twisted to form yarn or woven into a fabric for further use.  

Large-tow carbon fibre with over 40,000 filaments find applications in wind turbine blades and reinforced plastics compounds while regular-tow fibre with less than 24,000 filaments is used for high-end applications such as aircrafts and spaceships.

Zoltek chairman and chief executive officer Zsolt Rumy said, "This transaction represents a great result for our shareholders, customers and employees. Toray provides unique opportunities to drive the continued growth of our commercial carbon fibers business well into the future."

The transaction, which has been unanimously approved by the boards of both the companies, is expected to close by early next year subject to customary closing conditions and regulatory approvals.

Further to the closing of the deal, Zoltek will become a wholly-owned subsidiary of Toray and operate as a separate business unit.

St Louis, Missouri-based Zoltek is an applied technology and advanced materials company producing carbon fibre composites used in a range of commercial products, which it sells under the Panex trade name. The company also produces a stabilized and oxidized acrylic fiber used in flame- and heat-resistant applications, which it sells under the Pyron trade name.

Zoltek, which entered into large-tow carbon fibre production in 1988 expanded the business by acquiring plants in Hungary and Mexico and has recently realised significant growth in its business due to demand from wind-energy related application.

For the year ended September 2012, the company reported revenue of $186 million and a net profit of $23 million.

Tokyo-based Toray is the world's largest producer of carbon fiber and Japan's largest producer of synthetic fiber. The company operates in seven business segments which include textiles, plastics and chemicals, IT-related products, carbon fibre composite materials, environmental engineering, and life science. Toray's annual sales are over $16 billion.

According to Toray, the global demand for carbon fibre is expected to grow over 15 per cent annually as an advanced material which contributes not only to energy saving through weight reduction but also to spread of renewable energy as alternative to hydrocarbon energy.

By acquiring Zoltek, Toray has gained opportunity for further growth, expanding its business in a different field from regular-tow carbon fiber by entering into the field of wind energy applications.

Toray's recent acquisitions include a minority 20-per cent stake in auto carbon fiber supplier Plasan Carbon Composites Inc.

CA Savvian Advisors LLC is serving as financial advisor to Toray in connection with the transaction while Zoltek is being advised by JP Morgan Securities LLC.