Apollo to merge chemical companies Hexion, Momentive

(Reuters) – Private equity firm Apollo Management [APOLO.UL] has decided to merge its two specialty chemicals companies, Hexion Specialty Chemicals Inc And Momentive Performance Materials Inc, creating a company with more than $7.5 billion in sales.

The companies said in a statement on Monday that they had agreed to the merger and that the new company will operate under the Momentive name.

The combined company is expected to have around $1.24 billion of adjusted EBITDA per year, they said.

According to sources familiar with the matter, the deal will create around $100 million of synergies and should accelerate Apollo’s exit from the businesses.

The company will work on integration for a quarter or two before considering an exit, according to the sources.

Private equity companies generally consider sales and initial public offerings as options for exits.

Craig Morrison, currently chairman and chief executive officer of Hexion, will become chairman and CEO of the combined company upon completion of the merger, expected in October, the companies said.

Jonathan Rich, president and CEO of Momentive, will join the board of directors of the company.

The new company will have operations located to serve all major regions of the world and 117 production facilities.

No deal terms were disclosed, but the transaction does not require additional financing.