Kraton Signs Definitive Agreement to Combine with the SBC Business of LCY Chemical Corp.

HOUSTON -- Kraton Performance Polymers, Inc. (NYSE: KRA) a global producer of highly-engineered polymers, announced that it has entered into a definitive agreement to combine with the styrenic block copolymer ("SBC") operations of Taiwan-based LCY Chemical Corp. ("LCY"). The transaction will combine Kratons broad product portfolio and innovation platform with LCYs cost-effective and innovative SBC operations and its proven record of driving growth in China and broader Asia.

The combination agreement calls for LCY to contribute its SBC business in exchange for newly issued shares in the combined company, such that Kratons shareholders and LCY will each own 50% of the outstanding shares of the combined enterprise. The combined company will be incorporated in the UK, will be listed on the NYSE, and will be led by Kevin M. Fogarty, Kratons President and Chief Executive Officer, and a global management team with administrative headquarters located in Houston, Texas.

"This combination addresses the strategic objectives of both Kraton and LCY. For Kraton, it represents a logical next step in our ongoing strategy to reposition our manufacturing assets, providing for significant improvements in overall cost structure, and furthering our investments in Asia, thereby increasing our participation in the fast-growing markets of China, and Asia Pacific more generally. Moreover, the combined companys capital structure, financial flexibility and cash-flow profile will serve as a strong foundation for continued investment in growth," said Kevin M. Fogarty, Kratons President and Chief Executive Officer. "Kraton is an innovation company and our commitment to innovation, including our ongoing portfolio shift, will continue as the combined company focuses on accelerating growth in both its innovation portfolio and its core product offerings."

"LCYs SBC business, with its cost-effective operations and the strategic location of its manufacturing plants, including its recently expanded 300 kiloton plant in Huizhou, China, has generated growth rates exceeding twice the average of the SBC industry. Operations of the combined company will benefit significantly from LCYs cost-effective process capabilities and strategic sourcing of raw materials in Asia," added Fogarty. "We expect the combination to result in synergies of $65 million on a run-rate basis by 2017, which will be achieved through fixed-cost rationalization, optimization of variable-costs and through reductions in overhead costs. We estimate we will incur costs totaling approximately $70 million in the next three years to achieve these synergies. We also expect the combination to be accretive on an operating basis by $0.75 - $0.80 in the first full year of combined operations."

"Through the leadership of Bowei Lee, Chairman and Chief Executive Officer of LCY, LCY has established an impressive track record for profitable growth in its SBC operations. We feel that LCYs market presence in Asia and the cost effectiveness of its manufacturing operations provide a strong complement to the innovation