Stern School of Business Chemtura

Chemtura (CHMT: NYSE)
Seth Shevlin, Wei Ming Wong, Subeg Singh,

Manan Bhandari
1.
Industry Overview
2.
Company Overview
3.
Thesis
4.
Risks
5.
Conclusion
Thesis
Chemtura has emerged from successful restructuring in

the 2010 to become a global powerhouse in the specialty
chemicals space. Now, Chemtura is streamlining its
business by capitalizing on divestitures to improve
capital structure and position for further growth as a pure
play IPP and IEP company.
Even without sale of the business the IEP and IPP
businesses are set to perform very well long term
Once the market notices this the company will be

valued more in line with peers
Potential sale of the business could drive over 40% upside
Weak IEP business has been overblown and driven down
stock price to make to an attractive entry point
3
Recent Share Price Decline

$24.00
$23.50
$23.00
$22.50
$22.00
$21.50
$21.00
$20.50
1. Industry Overview
Industry Overview
The Chemical Industry
The chemicals industry converts raw materials such as oil, natural gas, air,
waster, metals and minerals into various different products
The global chemical industry had sales of $3.6 trillion (as of 2010), where
US sales amounted to $689 billion (19% of global sales)
Four general categories: Basic and intermediate chemicals, Specialty
chemicals, Life science chemicals, Science and technology chemicals
Outperformed the market and most of its customers in recent years, is
very profitable, still growing and earning its cost of capital
KPMG, McKinsey, Innovest, ValueLine

5
Industry Overview
Chemical Industry - Products
Basic and Intermediate
Largest segment by sales
Employs one-third of the
workers in the industry
Produces polymers, bulk
petrochemicals and
intermediates, fertilizers, and
inorganic chemicals
End uses: plastic for
packaging, home
construction, appliances,
PVC, piping, toys and games
Specialty
Life Sciences
High value-added, low

volume products with many
differentiations
Differentiated biological and

chemical substances used to
induce specific outcomes in
humans, animals, plants or
other life forms
Produces fine chemicals,

adhesive sealants, catalysts,
dyes and pigments, industrial
gases, resins and plastic
additives
Produces agrochemicals,
pharmaceuticals and
biotechnology products
Strength measured upon

intellectual property and
R&D capabilities
Sources: KPMG
62
Science and Technology

Enhance the characteristics
of traditional specialty or life
science chemical products
Produces advanced materials
that transform current
technologies
Highly valued by specialty
chemical companies to
remain innovative and
adaptable to changing
consumer preferences
Industry Overview
Production of Chemical Goods
Processing Strategies
Manufacturing Facilities
Required inputs vary between raw materials, natural gas, crude oil,
among others
Scale of manufacturing (from largest to smallest): basic and

intermediate life sciences specialty chemicals fine chemicals
Renewable feedstock and cleantech/green chemistry strategies have

been developed by over twenty specialty chemical companies over the
past seven years due to increasing regulation
Elevated feedstock prices and rapid growth of Asian markets have

caused many companies to expand production into China, Malaysia and
other low-cost emerging markets
Such strategies include: smart plastics, nanomaterials, oxidation of

alkanes, etc.
Manufacturing locations are often clustered, share utilities and large

scale infrastructure, in order to promote industrial symbiosis and
achieve economies of scale
Future value to come from the first movers within the cleantech space
DuPont Focus on revenues from non-depletable resources
BASF move towards alternative plasticizer to reduce toxicity
within toys
The process in which specialty chemicals are created is called batch
processing - a finite quantity of product is made during a period of a
few hours or days
Sources: KPMG, Innovest, Bain Insights, BASF Investor Presentation, Pbworks, SOCMA
7
Industry Overview
Specialty Chemicals
The Specialty Chemicals industry is a mature and cyclical
sector that develops specialized chemical products such as
adhesives, industrial gases, lubricants, agrichemicals, and
polymers for various sectors including aerospace, agriculture,
and manufacturing
Traditionally a fragmented industry now moving towards
consolidation
Currently an industry in international transition with a focus on
expansion into Asian markets
With improving economic conditions, posits the industry to capture
cyclical upswing
Revenue Drivers - Intangible value from innovation, improvements

towards resource efficiency, access to scarce raw materials
Major Players - Dow Chemicals, Chemtura, AkzoNobel, BASF,
DuPont, Bayer
Outperforms similar sectors (8.8% vs 8.0% vs 7.8%)
Sources: McKinsey, Innovest, KPMG, ValueLine

8
2. Company Overview
Company Overview
Revenue Segments
Leading diversified global developer, manufacturer and marketer of performance-driven engineered specialty chemicals for
industrial manufacturing customers
Sales by Segment
Industrial Performance
Products (IPP)
Industrial Engineered
Products (IEP)
Chemtura AgraSolutions
Provides synthetic base-stocks,

petroleum additives, synthetic
finished lubricants and greases
for a diversified set of industries
20%
Offers catalyst components,

surface treatments, flame
retardants and a bromine based
product line for industrial
intermediates
44%
36%
Provides seed treatments and

other key products for the
agriculture and health industries
for use in their core operations
Industrial Performance Prodcuts

Investor Relations
10
Industrial Engineered Products
Company Overview
Chemturas 3 Operating Segments
Industrial Performance
Products
Key Products
Key Products
Key Products
Synthetic Lubricants and Greases

Synthetic Basestocks
Lubricant Additives
Urethanes
Brominated Performance Products

Flame Retardants
Fumigants
Organomettalics
Seed Treatment
Fungicides, Miticides, Insecticides
Growth Regulators
Herbricides
End-Use Markets
End-Use Markets
End-Use Markets
Automotive
Aviation
Consumer Products
Energy
Refrigation
Agriculture
Construction
Electronics
Furniture
Pharmaceuiticals
Transportation
Investor Relations
11
Agriculture
Public and Animal Health
Company Overview
Competitors and Products
Key Competitors
Branded Products
Company Wesbite
12
Company Overview
Chemturas Geographic Reach
Chemtura is a global leader in its 3 operating segments
and is looking to continue to expand in emerging markets
Sales By Geography
In 2014, in order to better serve our customers in growth

markets for our products, we opened new capacity in
Nantong, China; Ankerweg, the Netherlands; and
Bergkamen, Germany; and we operate major development
centers in North America, Europe and Asia
19%
North America
Europe/Africa
Latin America
44%
9%
Asia Pacific
28%
Geographic Reach
North America
EMEA
Latin America
Annual Report
13
Company Overview
Recent Events: Restructuring
March 18, 2009
Chemtura and its 26 US based affiliates filed for Chapter 11 Bankruptcy looking for voluntary reliefs
"Like other companies in our industry and around the world, Chemtura's order volumes have declined markedly in recent months due to the impact
of the global economic recession. This has led to a significant decrease in our liquidity and cash flow. Despite our efforts to increase liquidity,
including through the potential sale of a business, our reduced liquidity position, combined with the anticipated expiration of our bank waiver,
led us to determine that a court-supervised restructuring was the best course of action. - Craig A. Rogerson, CEO of Chemtura
Received $400 million in expensive DIP financing from Citibank at LIBOR plus 750 basis points, advised by The Shearman & Sterling Group
November 10, 2010
Chemtura announces a successful financial restructuring
With the successful completion of our financial restructuring, we have significantly reduced our debt, improved our cost structure and resolved a
considerable amount of environmental and other liabilities.- Craig A. Rogerson, CEO
TURNAROUND: Focus on Electronics and Energy, Transportation and Agriculture
Investor Relations
14
Company Overview
Recent Events: Discontinued Operations
Chemtura underwent major divestitures in the past couple of years to focus on
its core businesses and discontinue non-essential / underperforming business
segments
Share Price Impact:

Post Sale of Consumer Products Segment
$27.00
Sale of Consumer Products- October 2013
$26.00
Developed, manufactured and sold performance chemicals to consumers for inhome and outdoor use, such as recreational water treatment products, branded
cleaners and degreasers
$25.00
Sold Consumer Products segment including dedicated manufacturing plants to

KIK (private label manufacturer of consumer products) for $300 million in cash
$22.00
$24.00
$23.00
$21.00
Sale of Antioxidants and UV Stabilizers Business- April 2013

Sold Antioxidants and UV Stabilizers segment, including dedicated plants, to SK
Capital Partners (private investment firm) for $200 million
Share Price Impact

Post Sale of Antioxidants and UV Segment
Proceeds from the sale will be used for repayment of debt and investment in
Chemturas continued growth.
$25.00
$24.00
$23.00
$22.00
$21.00
$20.00
$19.00
$18.00
This divestiture simplifies our business portfolio as we continue to invest in businesses with
less economic sensitivity that make greater contributions to our strategy of focusing on
specialty products and applications with greater growth potential
- Craig A. Rogerson, Chemtura, President and CEO
Press Release
15
Company Overview
Management
Craig A. Rogerson, President, CEO- Mr. Rogerson came to Chemtura in December 2008 after serving as President, CEO and Director of Hercules Inc. until
its acquisition by Ashland Inc. in November 2008. Mr. Rogerson joined Hercules in 1979 in the firms Water Management Chemicals Division. In April 1997, he
left Hercules to join Wacker Silicones Corporation, where he served as President and CEO. In May 2000, he rejoined Hercules as Vice President, business
operations of their BetzDearborn Division. He was eventually named Vice President and General Manager of that division in August 2000. Mr. Rogerson serves
on the Boards of Directors of PPL, the Society of Chemical Industry, and the American Chemistry Council.
Stephen Forsyth, CFO- Before joining Chemtura in 2007, Mr. Forsyth served for 26 years with Hexcel Corporation in a variety of executive capacities, the last
11 years as Executive Vice President and Chief Financial Officer. Prior to becoming Hexcels CFO, he had held positions of increasing responsibility including
serving as the General Manger of their specialty chemicals and specialty resins businesses, Vice President of International Operations and leading a number of
their major M&A initiatives.
Simon Medley, SVP of Industrial Performance Products- Mr. Medley joined Chemtura in 2012 as General Manager and President of Chemturas Petroleum
Additives Business, after 18 years with BASF, where he built a track record of international success in diverse industries leading sustainable, profitable growth
through market-driven innovation, strategic portfolio management and transformational cultural change. Between 2004 and 2010, Mr. Medley engineered
significant profitability improvements as SVP of BASFs Fine Chemicals and Care Chemicals.
Anne P. Noonan, SVP Industrial Engineered Products- Most recently Anne served as Vice President of strategic business development for Chemtura
Corporation. In this role, Anne was responsible for developing and executing on a comprehensive corporate portfolio strategy. She led several transactions
resulting in portfolio transformation, positioning Chemtura as a future pure-play specialty industrial chemical company. Prior to the merger of Crompton
Corporation and Great Lakes Chemical Corporation to form Chemtura, Ms. Noonan worked for Great Lakes Chemical for 19 years, where she held a variety of
business, research and advocacy positions.
Dalip Puri, VP of Investor Relations- He joined from Hewitt Associates in Chicago, Illinois, where he also served as Corporate Treasurer, overseeing the
firms capital structure strategy and client banking activities. Prior to that, he spent eight years at Delphi Corporation in Detroit, Michigan, in various roles
managing and overseeing capital planning, foreign exchange and commodity risk management, investor relations, regional treasury activities, and cash
management.
Investor Relations
16
3. Thesis
Thesis
Streamlining Business
Divesting non-core assets
Improving balance sheet
Cutting costs
Strong Industrial Business

Industrial Performance Products
(IPP)
(IEP)
18
Overblown weakness of IEP

business
Cost cuts
Improvements in 2014
Streamlining Business
Divesting Non-Core Assets
Sale of AgroSolutions
I. Pay down $200 million in debt
II. Return cash to shareholders
19
Thesis: Streamlining Business

Divesting Non-Core Assets
Fast-growing provider of agricultural chemicals and seed treatment products including fungicides, herbicides,
insecticides, plant growth regulators and seed treatments
Broad global service chassis in North America, Latin America, Asia Pacific, Indian Subcontinent, Europe, Middle East
and Africa
Currently in a definitive agreement to be acquired by Platform Specialty Products Corporation for $950 million in cash
plus 2 million shares of Platforms common stock
Chemturas NOLs will allow it to offset taxes and receive $850 million out of the $950 million in cash it will receive
Sale expected to be completed in November 2014
CHMT is evolving into a pure play specialty chemical company following
the sale of its crop chemicals business, scheduled to close in 2H14. We
expect the company to use a portion of around $1 billion of proceeds and
cash on the balance sheet in a tender offer for the shares. Due to significant
shareholder value creation, we rate CHMT a Buy.
-(James Sheehan, Suntrust Equity Research)
Sources: Chemtura AgroSolutions, MarketWatch

20

Improving Balance Sheet
Return to Net-Cash Position
Plans to Pay Down Expensive Debt
Has net-debt position since re-emergence from

bankruptcy in 2010
Plans to use excess cash and proceeds from

AgroSolutions sale to pay down $200 million in
debt
Weak balance sheet may have previously

resulted in discounted valuation
7.875% Notes, which are callable at 104%

of par
Investors may re-value the company more inline with peers due to improved liquidity
position
$100 million of 5.75 % Notes

Company will save $13.6 million in annual
interest expense
212

Pre-Merger
Post-Merger
After Debt Paydown
$400
$1,250
$1,046
$50
$50
$400
$1,300
$1,096
$450
$450
$350
$206
$206
$206
$100
$100
$0
$32
$32
$32
Total Debt
$788
$788
$588
Net Debt/(Cash)
$388
($512)
($508)
Capitalization ($ MM)
Cash
PSP Stock
Cash & Equivalents
5.75% Notes
Term Loan
7.875% Notes
Other Debt
222

Aggressive Share Repurchase
Company has bought $110 million of stock since 2011
Projected to repurchase $700 million - $1 billion of stock by year-end 2014
Openly acknowledged that it will need to look at other options in order to repurchase a significant amount of the float
after completion of AgroSolutions transaction
Considering a Tender Offer, a special dividend of up to $7 per share, or a combination of the two
Tender will most likely be at a premium to its current priceforecasted to be in the $30 range
232

Bear Case
Base Case
Bull Case
Current Shares Outstanding
90,570,000
90,570,000
90,570,000
Total Repurchase Amount
700,000,000
850,000,000
1,000,000,000
Tender Offer Price
$25.00
$30.00
$35.00
Shares Repurchased
28,000,000
28,333,333
28,571,429
Remaining Shares Outstanding
$62,570,000
$62,236,667
$61,998,571
Tender Offer Scenarios
24
Thesis: Strong Industrial Business

Pending capacity expansion and technological innovation
should drive revenue growth and improved operating margins
Has made big investments in the synthetic lubricants business,
which should now start to pay off
Management highlights high customer demand for more
capacity
Exxon Mobil is the only other major player in this space,
but has historically put its synthetics into its Mobil One
product instead of selling it in the open market
Added capacity from new synthetic lubricants facility in
the Netherlands (located near BP, one of its largest
customers), and in China
Increase in buyer demand for industrial foam, general
industrial applications, and material production applications
25

150
145
140
135
130
125
120
2010
2011
2012
2013

Oligopoly with Albemarle Corporation and Israel Chemicals Limited (ICL)
Leader in the foams market and mercury emissions prevention market
Poor 2013 foams performance because of ICL price cutting
Company is pushing into new technology that commands higher
prices
Segment will benefit from cost reduction and capacity management in the
near term
Increase in net sales due to demand for the Emerald Innovation 3000
product
Chemtura said customers continue to switch to this greener
alternative from the traditional HBCD flame retardant used in styrene
based insulation foam applications
Revenue growth from mercury control, MOCVD, MAO, bromine and oil
and gas applications
GeoBrom product should benefit from 2015 Mercury Air Toxics
Standardsx
26

200
150
100
50
0
2010
2011
2012
2013

Potential Sale: Craig Rogerson
CEO Craig Rogerson has a history of selling and monetizing business and has
publicly stated that he may pursue that option with future business
Craig Rogerson has a history of monetizing businesses:
2002 Sale of BetzDearborn
Rogerson, as General Manager, lead the sale of BetzDearborn, an industrial
water treatment company, a subsidiary of Hercules, to General Electric
$3.1 Billion sale; 8.5x EBITDA
2008 Sale of Hercules

Rogerson, as CEO, led the sale of Hercules to Ashland, the largest
chemical distributor in the U.S. and coincidentally, a competitor for
Chemtura
$3.5 Billion Sale; 8.5x EBITDA
Rogersons Chemtura Share-based compensation structure creates a vested

interest in the business:
Currently owns 423,796 shares of the company, an additional 315,000 shares
that have not vested, and 400,000 options that have not been exercised
Investor Relations
27

Recent Buyside Interest
Further investment into Chemtura by David Einhorns Greenlight Capital in
August 2014
$76 million and 1.06% of shares
Price declined on earnings and revenue Q2 miss

Improved volume in urethane products
Increased demand for industrial foam, general industrial
applications, and material production applications
Improved selling prices for petroleum additive products offset by
declines in urethane prices
Industrial Engineering products

Selling prices remained very weak due to competitive pressures in
electronics applications and organometallic catalyst components
AgroSolutions
Strong soybean market in Latin America and growth in cultivated
acreage
Equity Research
28
Thesis: Overblown weakness of IEP business

Catalyst Calendar
Events:
Q3 Earnings- October 28th
AgroSolutions Deal Finalization- December, 2014
Share repurchase information- January 2015
October 2014
January 2015
October 28th- Chemtura

will report Q3 Earnings
December 2014
Chemtura
AgraSolutions Deal set
to finalize in Q4
29
Chemtura will begin

share repurchase program
with proceeds from sale
4. Risks
Risks
Inability to close the AgroSolutions divestiture would harm our ability to look at this business as a pure play investment
Decides against strategy of divesting additional assets which would limit but not eliminate our significant upside potential
Inability to drive sales growth out of its IEP foams business would decrease our free cash flow and implied share price
Raw materials inflation could negatively impact margins by increasing cost of goods sold inputs
Delayed openings of international facilities will push back streamlining of manufacturing (China synthetics or Netherlands)
31
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Chemtura (CHMT: NYSE)

Seth Shevlin, Wei Ming Wong, Subeg Singh,

Chemtura has emerged from successful restructuring in

Once the market notices this the company will be

Recent Share Price Decline

KPMG, McKinsey, Innovest, ValueLine

High value-added, low

Differentiated biological and

Produces fine chemicals,

Strength measured upon

Science and Technology

Scale of manufacturing (from largest to smallest): basic and

Renewable feedstock and cleantech/green chemistry strategies have

Elevated feedstock prices and rapid growth of Asian markets have

Such strategies include: smart plastics, nanomaterials, oxidation of

Manufacturing locations are often clustered, share utilities and large

Revenue Drivers - Intangible value from innovation, improvements

Sources: McKinsey, Innovest, KPMG, ValueLine

Provides synthetic base-stocks,

Offers catalyst components,

Provides seed treatments and

Industrial Performance Prodcuts

Industrial Engineered Products

Industrial Engineered Products

Synthetic Lubricants and Greases

Brominated Performance Products

In 2014, in order to better serve our customers in growth

TURNAROUND: Focus on Electronics and Energy, Transportation and Agriculture

Share Price Impact:

Sale of Consumer Products- October 2013

Sold Consumer Products segment including dedicated manufacturing plants to

Sale of Antioxidants and UV Stabilizers Business- April 2013

Share Price Impact

Strong Industrial Business

Overblown weakness of IEP

I. Pay down $200 million in debt

II. Return cash to shareholders

Thesis: Streamlining Business

-(James Sheehan, Suntrust Equity Research)

Sources: Chemtura AgroSolutions, MarketWatch

Thesis: Streamlining Business

Return to Net-Cash Position

Plans to Pay Down Expensive Debt

Has net-debt position since re-emergence from

Plans to use excess cash and proceeds from

Weak balance sheet may have previously

7.875% Notes, which are callable at 104%

$100 million of 5.75 % Notes

Thesis: Streamlining Business

After Debt Paydown

Thesis: Streamlining Business

Thesis: Streamlining Business

Current Shares Outstanding

Total Repurchase Amount

Tender Offer Price

Remaining Shares Outstanding

Tender Offer Scenarios

Thesis: Strong Industrial Business