Deutsche Bank Comments On Eastman Chemicals Growth Strategy

According to Deutsche Bank, Eastman Chemical's EMN proposed acquisition of Sterling Chemicals is a modest positive as it builds on last year's acquisition of Genovique Specialties and supports Eastman's growth strategy in non-phthalate plasticizers. Deutsche Bank said that the primary rationale of this deal for Eastman is to expand its capacity to produce non-phthalate plasticizers (2010 revenue: $300MM, 5% of total sales) in order to keep pace with rapidly growing demand. “Given that Eastman's target ROIC for acquisitions is 15-20% and cost of capital is 8.5% (est.), we expect the deal to generate $10-$20MM, or $0.14-$0.28 of EPS accretion in 2012.” Eastman Chemical closed yesterday at $99.74.