Solutia completes acquisition of remaining 50% interest in Flexsys joint venture

By Caroline Salls

Pittsburgh, May 2 - Solutia Inc. has completed its purchase of Akzo Nobel NV's 50% interest in Flexsys, a 50/50 joint venture formed in 1995 with Akzo Nobel, according to a company news release.

Flexsys subsequently became a wholly owned subsidiary of Solutia, effective Wednesday.

"Solutia's businesses are world leaders in their markets, and Flexsys is the world leader in rubber chemicals. This truly global business will become an integral part of Solutia," Solutia president and chief executive officer Jeffry N. Quinn said in the release.

James R. Voss has been named senior vice president and president of Flexsys after previously a previous post as Solutia's senior vice president for business operations.

Enrique Bolanos, who led Flexsys for the past eight years, will remain active in the business and will help with the transition of Flexsys into Solutia, the release said.

Flexsys is a global business that employs about 600 people worldwide and has annual sales of $600 million, about two-thirds of which take place outside the United States.

As previously reported, to provide Flexsys with sufficient funds for its general corporate and other working capital needs, the joint venture has negotiated a $200 million commitment from KBC Bank NV and Citigroup Global Markets Ltd., which will be secured solely with the assets of the Flexsys entities and will not result in any additional obligations on Solutia or any of its subsidiaries.

To finance the Flexsys interest acquisition, Solutia has amended its debtor-in-possession financing facility to provide up to $150 million as an intercompany loan to the Flexsys entities.

Solutia said this intercompany loan is subordinate to the financing obtained directly by the Flexsys entities and has an initial term of six years.

In addition, no interest will be paid to Solutia on account of the subordinated intercompany loan until Solutia emerges from Chapter 11 and other conditions have been satisfied.

The company said the structure of this lending transaction provides tax and financing benefits to Solutia, including allowing the repayment of the intercompany financing without triggering a U.S. taxable income inclusion.

Solutia, a St. Louis-based manufacturer and provider of performance films, specialty chemicals and an integrated family of nylon products, filed for bankruptcy on Dec. 17, 2003 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 03-17949.

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