Solstice Advanced Materials Inc: SOLS/ESI acquisition feedback and debates

Research evidence excerpt

Solstice Advanced Materials Inc: SOLS/ESI acquisition feedback and debates

ve cost savings plan (~$150M). SOLS is targeting $180M in cost

savings by year 3, and expects there could be revenue synergies across semis

customers and thermal management materials. We don't have a precise estimate,

but would conservatively think maybe $40-50M in revenue synergies, which could

be ~$10-15M in higher EBITDA.

On a pre-synergy basis SOLS is buying ESI for ~18x 2027e EBITDA (based on

Monday open), including synergies this drops to ~14.5x. This compares to SOLS

trading pre-deal at ~12.5x EBITDA. On a P/E basis, the acquisition reflects ~24x

ESI's 2027 estimates, which compares to ~25x SOLS trading pre-deal. Investors

that have been more positively skewed on the deal have focused on the EPS

accretion and P/E multiple (SOLS now trading at ~19x 2027e P/E, and EPS growth

could accelerate to mid-teens plus post deal).

Solstice does expect there could be revenue synergy potential in deposition

materials used in front end semi fabrication (both companies sell there, different

products) and advanced packaging (only ESI sells here). There are also overlaps in

thermal management materials back end PCB/assembly (ESI and SOLS sell

different products). SOLS could also help speed up the capital build out and

commercialization of Kuprion (nano copper), introducing a new to the industry

product that can provide improved power and thermal performance on existing

substrates (incl adv packaging applications) and future substrates (ie glass).

Collectively, we estimate AI/Datacenter exposure increases to ~45-50% of SOLS

sales (incl nuclear), from we estimate ~20-25% prior.

Risks?

Execution risks: Investors ask about the ability for SOLS as a company and SOLS

management to integrate ESI.