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ExxonMobil (XOM) Divests Santoprene to Celanese for $1.15B

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Exxon Mobil Corporation XOM recently agreed to divest the global Santoprene business for a whopping $1.15 billion to Celanese Corporation CE, a chemical specialty company. The Santoprene business caters to automotive, medical and consumer products as well as other industries via developing a special type of rubber.

Celanese is expected to use excess cash and available liquidity from its balance sheet to fund the deal, and receive ExxonMobil’s two manufacturing sites located in Pensacola, FL and Newport in Wales. The Advanced Elastomer Systems Newport unit has a production capacity of 50,000 tons of thermoplastic elastomers per year. The AES business was created in 1991, in which ExxonMobil became the stand-alone owner in 2002.

By 2025, it was about to divest $25 billion worth of assets, per its 2019 plans. The Santoprene divestment is likely to close in the December quarter of this year. Around 350 employees from ExxonMobil will move to Celanese as part of the agreement, per Reuters. Notably, ExxonMobil stated last year that it has plans to lay off a significant number of workers to cut costs.

The latest divestment comes at a time when ExxonMobil is looking for ways to improve profitability in operations. Last year, the company incurred massive losses due to the COVID-19 pandemic. In the first quarter of 2021, it reported strong earnings owing to higher chemical margins and improved realized commodity prices. ExxonMobil is currently streamlining the business via focusing more on core operations. Overall, the company is taking efforts to preserve shareholders’ capital, while lowering costs.

Importantly, ExxonMobil expects the latest move to enable it to focus on primary olefin derivatives. It is likely to continue serving elastomer clients with Butyl rubber and Vistalon. Notably, its chemical unit recorded $1.4 billion in profits for the first quarter, skyrocketing from earnings of $144 million in the year-ago period on significantly higher margins from U.S. and non-U.S. operations.

Price Performance

The stock has gained 9.9% in the past three months compared with 5% rise of the industry it belongs to.

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Zacks Rank & Other Stocks to Consider

The company currently sports a Zacks Rank #1 (Strong Buy). Other top-ranked players in the energy space include PHX Minerals Inc. PHX and Pembina Pipeline Corporation PBA, each having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PHX Minerals’ bottom line for 2021 is expected to jump 180% year over year.

Pembina Pipeline’s bottom line for 2021 is expected to rise 42.2% year over year.

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Exxon Mobil Corporation (XOM) : Free Stock Analysis Report

Celanese Corporation (CE) : Free Stock Analysis Report

Pembina Pipeline Corp. (PBA) : Free Stock Analysis Report

PHX Minerals Inc. (PHX) : Free Stock Analysis Report

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