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Solutia’s prowess in developing chemicals found in everything from car tires to office windows throughout the globe drew the interest of Eastman Chemical Co. last summer. Now it’s buying the Town and Country-based company in a deal worth $4.7 billion.

Eastman, a chemical manufacturer based in Kingsport, Tenn., is acquiring Solutia for $3.4 billion in cash and stock, and assuming $1.3 billion in debt. The deal is set to close in mid-2012, pending shareholder approval.

Solutia makes specialty films and chemicals for the automotive and architectural industries, and employs 3,400 people worldwide, including 450 locally.

With $2.1 billion in revenue last year, Solutia is one of the largest public companies based in the St. Louis region.

Solutia has two local facilities - the Town and Country headquarters, with 300 employees, and a Sauget manufacturing plant where 150 people work.

A Solutia spokeswoman said there was no information yet on the fate of local workers, though headquarters jobs are often a cost-cutting target in mergers. On Friday, Eastman said the headquarters of the combined companies will be in Kingsport.

Menawhile, the Sauget plant - which makes chemicals for tire manufacturing - runs 24 hours a day, seven days a week.

Sauget Mayor Rich Sauget said he spoke with Solutia employees as recently as last week who were unaware that a sale was in the works.

“They mean a lot to us,” Sauget said of Solutia’s local workforce. “We hope, whoever comes in, that they see an opportunity with Solutia and their properties here.”

Despite the uncertainty, Eastman won’t be leaving the region, Solutia’s chairman, president and CEO Jeffry Quinn predicted.

“I certainly would expect the combined company to have a significant presence in St. Louis for some time,” Quinn said in an interview with the Post-Dispatch. Quinn, who joined Solutia in 2003, will leave the company once the sale finalizes.

In the sale announcement, the companies did not disclose how much Quinn stands to gain when the deal closes. However, Solutia’s most recent proxy statement stated last year that Quinn’s compensation, including cash severance and stock options, would have totalled $21.6 million based on the company’s stock price at the end of 2010.

Under the deal, Solutia shareholders will receive $22 in cash and 0.12 shares of Eastman stock for each share of Solutia that they own. Based on Solutia’s closing price Thursday, Eastman offered a 42 percent premium for Solutia’s stock.

Eastman, which had $7.2 billion in revenue last year, plans to fund the cash portion of the buyout with available cash and debt.

After the early morning announcement, Eastman’s stock soared. Based on Friday’s closing prices, Solutia shareholders will receive cash and stock valued at $28.05 for each Solutia share.

Meanwhile, Solutia’s stock jumped more than 41 percent after the sale was announced, closing Friday at $27.52 a share.

Eastman expects about $100 million in annual cost savings by the end of 2013, as the acquisition is expected to help lower costs and help the company purchase raw materials at lower prices payday loans. The company said the deal will immediately boost earnings.

Global push

The original Monsanto Co. spun off Solutia in 1997 in an effort to focus on drugs and agriculture. Solutia, burdened with heavy debt loads and retirees’ benefits dating before the spin-off, floundered as raw material prices rose and environmental legal costs increased.

In 2003, Solutia filed for Chapter 11 bankruptcy protection. It didn’t emerge out of bankruptcy until 2008.

During the years in bankruptcy, Solutia grew its international reach while divesting underperforming or non-core brands and businesses such as nylon, acrylic fibers and feed ingredients.

In 2003, only 30 percent of Solutia’s revenue came from international sales. Today, that has jumped to 75 percent.

“We’ve really transformed the company into one of the preeminent specialty chemical companies in the world,” Quinn said. “Many of the products we make are expensive to ship, so we built around the world to serve our customers.”

Growth in the company’s technical specialties division, for example, paralleled the development of infrastructure in places such as China. With the new roads, demand for radial tires - which use a chemical made by Solutia - is on the rise.

That global reach drove the Tennessee company’s interests in Solutia, Eastman’s chairman and CEO Jim Rogers said in a conference call with analysts Friday.

“With the addition of Solutia, Eastman will be adding manufacturing capacity in Asia over the next couple of years to meet growth,” Rogers said.

Eastman, which has 10,000 employees globally, was itself a product of a spin-off. The company was spun-off from camera and film maker Kodak in 1994.

In the conference call, Rogers said Eastman began exploring acquisition opportunities last summer.

“Solutia was number one then, and it has stayed number one through this whole process,” he said.

Talks with Solutia’s board began in the fall and intensified in the past 30 days, Quinn said.

The deal came on the same day Solutia announced fourth quarter and full-year financial results. Solutia’s fourth-quarter net income rose 15 percent to $54 million, or 45 cents per share, from $47 million, or 39 cents per share, a year earlier. Revenue increased 8 percent to $526 million.

For the full-year, Solutia earned $262 million, or $2.16 per share. That compares with earnings of $78 million, or 65 cents per share, in the previous year. Annual revenue climbed 8 percent to $2.1 billion.

Tim Logan of the Post-Dispatch and the Associated Press contributed to this report.

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The biggest year for overseas buyouts by Japan

Things are looking up in Europe, at least for now, as borrowing costs in Italy and Spain eased Thursday following strong debt auctions.

Spain’s auction of nearly €10 billion worth of bonds in three different maturities met with strong demand, as did Italy’s €8.5 billion of 12-month bills.

The European Central Bank was "supplying quite a bit of liquidity" by buying an undisclosed amount of bonds to prop up the market, as it typically does, said Frances Hudson, global thematic strategist for Standard Life Investments in Edinburgh, Scotland.

But the auctions were also driven by newfound confidence in the new leadership of the Spanish and Italian governments, she added. "You go into a halo effect because you’ve got a new government so people are willing to give them the benefit of the doubt."

German and Italy sound upbeat on debt crisis

David Rodriguez, quantitative strategist at DailyFX, noted that Spain wound up selling nearly twice the amount it had planned on auctioning, which signals real market demand for bonds, not just support from the ECB.

"Maybe the ECB stepped in, but the ECB wouldn’t have the firepower to put €5 billion into that auction," he said. "I think what investors are seeing is the probability that these nations will remain solvent for the foreseeable future."

The healthy demand for Italian and Spanish bonds helped to drive up European stocks. London’s FTSE () closed higher by 1.2%, the DAX () in Frankfurt rose 2 no teletrack payday loan.5% and the CAC 40 () in Paris jumped 2.3%.

The auction results also helped to drive down bond yields. The average yield for the Italian 10-year bond slipped to 6.63%, remaining below the anxiety benchmark of 7%, and the average yield for the 10-year Spanish bond dropped to 5.13%.

But Hudson cautioned against extrapolating too much from the Italian bond auction and its impact on the 10-year bond yields, since it was for bills, not bonds. Also, she said she wasn’t sure how long the renewed confidence would last.

Don’t get too comfortable with European bonds, urged Marc Chandler, strategist at Brown Brothers Harriman, noting that more auctions lie ahead.

The euro’s fatal problem isnt’ spending

"Risk lies with the bond sale tomorrow, especially with the large increase in Italian bond prices today as the 5-year yield is off 60 [basis points] and the 10-year yield has dropped about 40 [basis points]," wrote Chandler, in a market report. "The year is long, and the amount that the sovereigns and banks need to raise is large."

The euro also got a modest boost Thursday, edging to $1.28 against the U.S. dollar, after hitting an 18-month low of $1.26 on Wednesday.

"At least on the short end of the curve, you see a little bit of confidence returning to the market," said Rodriguez, referring to the euro and European bonds. 

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Despite warnings from professionals, many individuals had minds of their own. Or maybe it wasn’t their minds at all but rather their stomachs that led them away from the nauseating stock market losses and spasms of the last few years.

Regardless of intent, their approach to investing turned out to be a winning one. As the early-year stock surge gave way to a 17 percent plunge and record volatility after May, many an individual fled from stock funds and clung to bonds, savings accounts and gold.

By the end of 2011, they had earned a shocking 17 percent in 10-year U.S. Treasury bonds, an unusual gain given the historic average of just 5.5 percent a year in Treasurys and the warnings from professionals that U.S. government bonds were likely to turn into losers.

Investors also earned almost 10 percent in gold, and they avoided a 20 percent loss if they ignored the emerging-market funds that professionals had been lauding while the U.S. and Europe struggled with debt problems.

It turned out that financial troubles in Europe crimped demand for emerging markets’ basic materials. And as stressed European banks held off on loans to developing countries, the refuge that investment professionals had envisioned began to fade. Although the Standard & Poor’s 500 ended 2011 up less than a half percent, funds that invest in Latin America declined 22 percent, and China funds fell 24 percent, according to Lipper.

Whipsawed by historically high stock market volatility, a collapse of confidence in American and European leadership, the threat of a global banking crisis and a fragile economy, investors pulled $112 billion out of U.S. stock funds for the year and poured $133 billion into bond funds as a safe haven, said Charles Biderman, chief executive of Trim Tabs.

But the quest for safety went farther than bond funds.

People poured $710 billion into savings accounts, the fifth-highest amount in history, Biderman said.

“People have been burned so many times in equities in the last decade they weren’t going to take a chance,” said Biderman. “It’s going to take a long time for huge inflows into equity funds again.”

In fact, investors have been scared since 2008. During the last three years, investors have poured a remarkable $900 billion into bond funds and yanked $242 billion from U.S. stock funds, said Biderman. Despite stronger performance by the U.S. stock market than foreign markets, investors bet more on global funds than U.S. funds. They have put about $89 billion into global funds.

Investors have not regained the money they lost when the market started its 57 percent decline in October 2007. Investing in the Wilshire 5000, or the full stock market of large and small stocks, has left investors with a loss of about 17 percent, or about $4 trillion collectively free online credit report.

Sticking with solid dividend-paying stocks in defensive sectors such as health care, utilities and consumer staples such as soap and toothpaste did help in 2011, as investors worried about the global economy’s sliding back into a recession. The Dow Jones industrial average of blue-chip stocks climbed about 5.5 percent for the year, and funds that invest in health care stocks and utilities averaged gains of more than 7.5 percent as investors sought security and income from dividends. The Vanguard High Dividend Yield exchange-traded fund, which selects stocks paying high dividends, gave investors a 10.5 percent gain.

Amid worries of a new global banking collapse, banks throughout the world were among the worst performers. Funds that invest in U.S. banks declined about 13 percent.

One of the biggest mistakes of the year was to equate precious metal stock funds with gold investing. The precious metal funds, which include gold and silver mining companies, lost 22 percent, while the SPDR Gold Trust exchange-traded fund gained 9.6 percent. The gold ETF invests in gold bullion, not stocks. Still, gold shed a significant amount of its gains late in the year. By August, as investors worried about U.S. and European debt, gold had climbed 33 percent in 2011.

The other mistake was to bet on interest rates’ rising. If rates had risen, advisers’ warnings to avoid bonds would have been wise. But instead, Treasurys soared 17 percent, and the average U.S. bond fund climbed about 8 percent because investors worried about a recession. In recessions, investors tend to want the safety of bonds, and as they pour money into them, interest rates and yields drop while values of the bonds climb.

With yields near record low levels, it’s not likely Treasurys can repeat 2011 gains again.

“Investors need to realize they can lose money in bonds” if interest rates start climbing, said Biderman. Still, 2011 was humbling for anyone making any prediction, and analysts are expecting the same for early this year, as great uncertainty remains about Europe’s fate.

Given that scenario, holding a mixture of roughly half stocks and half bonds may be the best policy. It will relieve dependence on either stocks or bonds and insulate investors from losses in each. That approach with funds for people retiring in 2015 gave near-retirees a 0.11 percent loss in 2011 — a disappointment, to be sure, but also not the type of loss that will ruin a retirement.

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Stocks closed down more than 1% Wednesday, as investors continued to fret over how Europe could solve its debt troubles in 2012. Selling intensified ahead of the close.

On a light trading week, investors have few other economic or corporate indicators to mull before 2011 ends.

Still, traders and analysts said the low volumes led to more pronounced swings, and some of the moves are coming from year-end portfolio rebalancing rather than convictions over the trajectory of all stocks or a particular stock.

"I don’t know what to read into today," said Peter Boockvar, equity strategist at Miller Tabak + Co. "There’s nothing going on in the U.S. market. It’s a holiday week."

The S&P fell back into negative territory for the year.

The Dow Jones industrial average () closed down 140 points, or 1.1%. The S&P 500 () slid 16 points, or 1.3%. The Nasdaq () lost 35 points, or 1.3% .

Dragging down the technology sector Wednesday were RIMM, () Netflix () and Fossil (). The Nasdaq is down roughly 2% for 2011.

Despite Wednesday’s sell-off, the Dow remains up 5% for 2011.

Some traders still hope to close the year poised for a January bounce. To get there, some say 1260 would be the magic number for the S&P to clear on Friday.

"If we could clear 1,260 by the end of the week, we could see a strong rally in January," said Joe Bell, senior equity analyst at Schaeffer’s Investment Research.

If the S&P clears 1258 by year-end, it would mark the third straight year of gains. The index remains about 11% below where it closed at the end of 2007.

Still, after closing at 1250 Wednesday, stocks need to commence a substantial two-day rally to get there.

U.S. stocks have been buoyed recently by signs of improvement in the US economy, including declines in weekly claims for unemployment benefits and an uptick in new home construction.

But investors say the market remains vulnerable as the debt crisis in Europe continues to threaten the outlook for the global economy and financial markets easy to get unsecured personal loans.

One bright spot for Europe on Wednesday was an Italian auction of 3- and 24-month bonds that drew strong demand and yields half as high as the previous month’s auctions. The results helped lift European equities and banks.

Investors will be more closely watching Thursday’s auction of Italian 10-year bonds, which have seen yields continue to flirt with the 7% danger zone. That level is worrisome because it flashed the first warning signs for Ireland, Portugal and Greece, which all eventually needed bailouts.

U.S. stocks ended a listless session little changed Tuesday as investors weighed reports on consumer confidence and home prices.

World markets: Europe’s markets finished lower. Britain’s FTSE 100 () eased 0.1%, the DAX () in Germany slumped 2% and France’s CAC 40 () lost 1%

Economists a bit more optimistic

Asian markets ended mixed. The Shanghai Composite () rose 0.2%, the Hang Seng () in Hong Kong fell 0.6% and Japan’s Nikkei () lost 0.2%.

Currencies and commodities: Oil prices eased off the previous sessions spike, slipping $1.64 to $99.70 a barrel. On Tuesday, crude prices jumped 2% after Iran threatened to choke off the flow of oil passing through the Strait of Hormuz.

Gold futures for February delivery fell $31.40 to $1,564.10 an ounce.

The dollar fell against the British pound and the Japanese yen but edged higher against the euro.

Companies: Shares in the financial sector remained under pressure throughout the trading day.

Top stocks of 2011

Citigroup (, Fortune 500), Credit Suisse (), Wells Fargo (, Fortune 500), Morgan Stanley (, Fortune 500), Goldman Sachs (, Fortune 500) and Bank of America (, Fortune 500) closed down between 1% and 4%.

Bonds: The price on the benchmark 10-year U.S. Treasury moved up sharply, with the yield falling to 1.928% from 2.01% from late Tuesday.  

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Wall Street is pointing higher after 23 European nations agreed to tie their economies closer together in hopes of heading off any future debt crisis.

Dow futures rose 0.5 percent to 11,999 before the market opened Friday. The broader Standard & Poor’s 500 futures are up 0.5 percent at 1,236.

The 23 countries, 17 euro zone nations and six prospective members, will try to craft a new treaty that will penalize budgetary offenders that threaten the bloc.

The rising futures are following stock indexes higher in Europe, though they were down from their daily peaks. Germany’s DAX is up 1.5 percent at 5,963 while the CAC-40 in France rose 1.7 percent to 3,148. The FTSE 100 index of leading British shares is 1.1 percent lower at 5,484.

The euro is also trading 0.3 percent higher at $1.3384.

Germany and France, the two biggest economies in the eurozone, had hoped to persuade all 27 members of the European Union to back a change to the EU treaty that would impose tight fiscal rules on its members. However, Britain and three others refused to join in.

Many think that a solution to the debt crisis can only come if the European Central Bank takes a more active role, possibly by buying up more government debt in the markets. It currently buys bonds in the markets, but only reluctantly, and in small quantities.

On Thursday the European Central Bank’s president Mario Draghi suggested he had no intention of increasing bond purchases after the bank delivered on market expectations to reduce its main interest rate by a quarter percentage point to 1 percent fast cash loans.

Draghi said he was surprised by some interpretations of his comments last week that “additional steps” would be taken if the 17 countries that use the euro agreed to closer budget controls. Germany and France have proposed a plan on closer fiscal unity that will dominate debate at the EU summit of leaders, which starts later Thursday.

Earlier in Asia, stocks were weighed down by an cautious response to the deal.

Japan’s Nikkei 225 fell 1.5 percent to close at 8,536.46 while South Korea’s Kospi sank 2 percent to close at 1,874.75. Hong Kong’s Hang Seng tumbled 2.7 percent to end at 18,586.23.

Mainland Chinese shares fell less than other Asian markets after inflation data for November dropped to a less-than-expected 4.2 percent. The benchmark Shanghai Composite Index retreated 0.6 percent to close at 2,315.27, while the Shenzhen Composite Index lost 0.9 percent to finish at 961.81.

Oil prices were fairly subdued _ benchmark oil for January delivery rose 16 cents to $98.50 a barrel in electronic trading on the New York Mercantile Exchange.

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Greece’s tortuous power-sharing talks entered a fourth day Thursday, with the country’s president hosting a meeting of party heads a day after negotiations descended into chaos and political leaders failed to name a new interim premier.

Outgoing Prime Minister George Papandreou, the head of the opposition conservatives, Antonis Samaras, and the leader of a small right-wing party were meeting with the president Thursday morning to settle on a new prime minister and cabinet.

The new temporary government’s aim will be to secure a new European debt deal and ensure Greece receives the vital next euro8 billion ($10.9 billion) installment of its existing euro110 billion facility, without which the country faces a catastrophic default within weeks. Elections are then expected to be held in February.

Thursday’s talks come after a similar meeting Monday night collapsed, with Giorgos Karatzaferis, the head of the right-wing LAOS party, storming out in a rage only minutes after entering the presidential mansion. The precise reason for his anger was unclear.

The hope is that the fourth day of talks will finally yield a new prime minister to head an interim government that will secure the country’s continued bailout funding payday loans. European leaders have been pressing for an end to the political turmoil in Athens that has endangered the country’s bailout funding and even its continued presence in the eurozone.

“This is the third time I’m coming here for (this) issue, and I hope it’s the last,” Samaras said as he arrived for the meeting.

Despite three days of wrangling and intense European pressure, Greece’s main parties have been unable to agree on who will lead the new government, which is expected to only be in power for a few months before leading the country to early elections in February.

Greece’s deliberations over the past few days have taken a backseat to developments in Italy where Premier Silvio Berlusconi has announced his intention to resign soon after a new package of economic reforms are passed. But his announcement has done to little to assuage market concerns that Italy is facing a Greek-style economic crisis and the country’s borrowing costs have shot through the roof.

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About 1,000 Libyan revolutionary troops have launched a major assault on Moammar Gadhafi’s hometown, surging from the east to try to capture the last area under loyalist control.

Tuesday’s push to rout the remaining resistance from Sirte came a day after commanders announced they had captured most of a second stronghold, Bani Walid.

Libyan fighters have squeezed the die-hard Gadhafi supporters into an area comprising just a few blocks in Sirte but have been unable to gain full control of the city.

It has been more than two months since the former rebels gained control of the capital and much of the rest of the oil-rich North African nation. Persistent fighting has prevented Libya’s new leaders from declaring final victory and setting a timeline for elections.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

TRIPOLI, Libya (AP) _ Libyan revolutionary forces have captured almost all of Bani Walid, one of Moammar Gadhafi’s last remaining strongholds, but still face pockets of resistance as they try to end a weeks-long standoff, officials said Monday.

Fierce resistance in Bani Walid and Gadhafi’s hometown of Sirte has prevented Libya’s new leaders from declaring full victory and setting a timeline for elections. It has been more than two months since the former rebels gained control of the rest of the oil-rich North African nation.

In a step toward normalcy, the transitional leadership council confirmed it has signed an agreement with NATO that partially lifts the no-fly zone imposed in March over the country, allowing resumption of some flights without seeking NATO approval. The embargo was imposed as part of the U.N. Security Council resolution that authorized airstrikes to protect civilians from Gadhafi’s regime.

Anwar Elfeitori, the minister of transportation and communications, said the agreement signed Thursday in Malta will make it easier to transport wounded fighters from the front lines for treatment.

“The partial lifting of the air embargo will help with the transportation of the casualties, which is the No. 1 priority at this time, as well as facilitate the movement of people between Libya and the rest of the world,” Elfeitori told The Associated Press in an interview.

He said the agreement only applies to specific routes and altitudes for humanitarian flights but is designed so it can be amended to include other areas as security conditions allow.

In Washington, State Department spokesman Mark Toner said the revolutionary council fighters are making progress short term personal loan. He called on pro-Gadhafi forces “to lay down their weapons and join the new Libya.”

NATO officials have expressed surprise at the persistence of Gadhafi’s supporters. Libyans believe the heavy resistance signals some of Gadhafi’s sons and other high-level regime figures are hiding in the areas.

Fighters in Bani Walid, which has proven particularly hard to capture because of its difficult terrain, said they have entered the city center for the first time but still were fighting Gadhafi supporters in surrounding villages.

“We liberated the city around sunset on Sunday and raised the revolutionary flags all over the city,” field commander Abdel-Salam Genouna told The Associated Press. He said fighters had occupied the central marketplace, the hospital, the hotel and an old fort that had all been used as bases for Gadhafi loyalists.

“We are patrolling the neighborhoods because there are still some scuffles, but otherwise it is completely under our control,” he said, adding revolutionaries also had control of a steep valley called Wadi Zeitoun that had been a sniper base for Gadhafi’s forces.

“Our forces are everywhere inside the city, and we are protecting the few families we found inside,” he said.

He said fighters from Sabratha, Tripoli and Bani Walid were involved in the operation.

Col. Ahmed Bani, a military spokesman in Tripoli, said revolutionary forces had control over more than 90 percent of the city. He said revolutionary forces had suffered heavy casualties but declined to give a number.

Residents and fighters said that Gadhafi forces retreated in the face of the advance over the past two days.

Moammar al-Warfali, a doctor in Bani Walid, said fighters loyal to the new transitional government seized the center, a key hospital and several other high buildings used by Gadhafi’s snipers to prevent any advance by the revolutionary fighters.

He also said Gadhafi’s son Seif al-Islam had been seen in the city as recently as last week.

NATO has pledged to continue airstrikes for as long as necessary, saying pro-Gadhafi forces continue to pose a threat to civilians in Libya.

Britain’s Foreign Secretary William Hague also pledged more humanitarian and financial support Monday during a visit to Tripoli.

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TORONTO