00:00Honeywell spinoff, Solstice, is buying Element Solutions in a $14.5 billion deal.
00:04It creates a larger supplier of the specialty chemicals used in semiconductor manufacturing.
00:10Joining us now is Element Solutions CEO, Ben Glicklich.
00:13Ben, thank you so much for joining. Congratulations on this deal.
00:16Thank you. Thanks for having me.
00:17And look, I know you yourself in Element.
00:19In the past, you've been the acquirer. You've been quite acquisitive.
00:22And here we have a spinoff from Honeywell that's not even one year old.
00:26I think it actually trades at a smaller market cap than you do itself.
00:30So why not continue to go at it alone? Why become part of the Honeywell spinoff?
00:35So Element Solutions has had a great run. We've built a great business.
00:38We've done a lot to improve our portfolio.
00:40And the organic path was really compelling.
00:42We were really excited going about our business, making our businesses better,
00:46deploying capital in prudent ways.
00:47Solstice came along and offered a very compelling value proposition on the short term,
00:53but also an ability to accelerate value creation over the long term.
00:57We believe these businesses are better together.
01:00The combined portfolio is exceptional.
01:02There's real synergies.
01:03It's an accretive deal for Solstice.
01:05And our shareholders are receiving Solstice shares.
01:07And so we'll participate meaningfully in that long term upside.
01:10Can I tell the story that you told me earlier about Martin Franklin?
01:13Sure, absolutely.
01:14How did you two meet?
01:15So I was coming out of business school.
01:17This was over a decade ago.
01:19And I was looking to partner with someone to build something long lasting.
01:24I sent him a cold email.
01:26There you go, folks.
01:27Send that cold email.
01:28So what is it about polymers and, you know, success with chemicals and so on?
01:33Like, how do you keep doing it when you would think, you know,
01:36a company like Honeywell can already do it better?
01:38Yeah, it's a fair question.
01:40There are different types of chemicals businesses out there.
01:43Element is a specialty materials business.
01:45It's a solutions provider.
01:47So we don't really make molecules.
01:48We work with our customers to buy molecules from other people
01:52and develop solutions that solve their pain points.
01:55We've got a great portfolio of capabilities
01:58and really great people all over the world
02:00focused on solving our customers' problems.
02:02So it's a people-based business.
02:04When I look at what Solstice is great at,
02:06they've got great technology.
02:07They've got great manufacturing know-how.
02:10Great market-leading brands in some of our existing customers.
02:14So what does this deal do?
02:16What are we bringing together?
02:17We're bringing together a portfolio that works well together.
02:20The products sit next to each other in our customer supply chain.
02:23They've got know-how in process engineering,
02:26in new molecule synthesis.
02:27We've got know-how in taking those molecules
02:29and mixing them together in a customer-intimate, solutions-oriented way.
02:33So their skill sets make our business better
02:36and our customer intimacy and relationships
02:38can accelerate growth for their portfolio.
02:41It's a really good fit.
02:42Can we take a step back and just talk about
02:44what part of the AI universe that you sit in
02:46and what it means to have you together?
02:47It's my understanding, well, you're kind of more in the chemicals
02:49for chip fabrication itself.
02:51And then Solstice is more about data center cooling.
02:54What about bringing those two things together
02:57is better for customers than just being able
02:59to interact with your companies apart?
03:00Yeah, so Solstice has a great refrigerants business.
03:04And so data center cooling, when you think about air cooling,
03:07that's very relevant.
03:08Solstice also has a $400 million electronics materials portfolio.
03:12We've got a $2 billion electronics materials portfolio.
03:15What Solstice's products are used in electronics materials
03:18are for copper deposition, vapor deposition onto silicon,
03:21and thermal management.
03:22We all know about the incredible problems with heat
03:25that these data centers are dealing with.
03:26We've got the refrigerants business,
03:27but also thermal management materials that are used in chips.
03:31We've got a set of solutions that go into thermal management,
03:35but other types of products go into copper deposition
03:38in other ways for silicon and onto printed circuit boards.
03:40So we actually don't overlap
03:42in terms of what our specific products do,
03:45but we are adjacent to each other.
03:47And the supply chain needs partners
03:50that can bring materials compatibility solutions
03:53to market for them.
03:54And we're able to do that.
03:56Well, congratulations on this one, but what's next?
03:58Because obviously there's a lot of this space.
04:01I mean, the cooling problem itself is going to be a problem
04:03for the industry for a decade or two to come.
04:05Once we go to the moon.
04:06Well, even there, potentially, who knows?
04:09It's a great question.
04:10Look, I think that this business is really well poised
04:13to continue to execute well, grow organically.
04:16There's a lot of integration to do
04:17and a lot of opportunities to further support our customers
04:21and enable their growth.
04:22But this is also a great platform for further growth.
04:25We're going to come out of this combination
04:27with a healthy balance sheet.
04:28And I expect this business to be on the front foot
04:30from a capital allocation perspective
04:32pretty soon hereafter.
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