Solutia and Eastman Chemical Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Eastman Chemical (NYSE: EMN  ) and Solutia (NYSE: SOA  ) both jumped more than 10% after the former announced it was buying the latter.

So what: Solutia's shares charged 40% higher on the buyout offer that would pay $22 per share of cash and offer 0.12 shares of Eastman Chemical per share. The offer, as of the close last night, would have been worth $27.65 per share, but the deal was sweetened a bit when Eastman's shares rose as much as 11% in trading today.

Now what: Unless the offer is increased, or a bidding war emerges, this is a great time for Solutia investors to cash out. Selling now eliminates risk of a deal falling through and doesn't lock you into Eastman Chemical shares if you wait for the deal to close. As for Eastman Chemical, this deal gives it some great growth prospects, especially in Asia, and with an 11.7 trailing P/E ratio this could be a cheap stock long-term.

Interested in more info on Solutia? Add it to your watchlist by clicking here. If you want to know more about Eastman Chemical add it to your watchlist by clicking here.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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  • Report this Comment On January 27, 2012, at 2:44 PM, NerfBall wrote:

    I agree with you, Travis. Presuming it doesn't fall through or hit any snags, this seems like a win/win proposition all the way. I feel like this may just be the first domino to fall in a wave of consolidation and M&A activity that might/could and probably should take place within the chemical industry.

    There are specialty chemical companies ala Huntsman, Albermarle and W.R. Grace that are just ripe for the taking (and particularly Huntsman in my opinion, with their strong focus on TiO2 as well as their heavy presence in Asia), and cash-flush domestic giants like Dow and du Pont amongst others who could well benefit from taking over any of those companies, and that's not even mentioning potential European and Middle Eastern/Asian buyers.

    I feel like a wave of consolidation is just beginning here. It's a good time to be in chemical stocks in my opinion.

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