Celanese and Blackstone have announced plans to combine their global acetate tow business in a joint venture. Celanese will own 70% and Blackstone 30%. Expected 2017 revenue for the jv will be $1.3 billion with adjusted EBITDA margins of about 40%.
Celanese will contribute its cellulose derivatives business unit, including its equity interest in existing jv’s with China National Tobacco Corporation, and Blackstone will contribute its Rhodia Acetow business, which it acquired from Solvay on 1 June for around €1 billion ($1.1 billion). The partners have secured commitments for $2.2 billion of debt on behalf of the jv. Roughly $600 million of the debt will be used by Blackstone to pay down existing debt contributed to the jv and $1.6 billion will be paid as a dividend to Celanese.
The jv will have around 2,400 employees, eight wholly owned manufacturing facilities, and three existing jv sites. The jv will be governed by a board consisting of three directors appointed by Celanese and two by Blackstone. The board, management team, and name of the company will be decided at a later date. The jv is expected to be headquartered in Amsterdam, the Netherlands.
Celanese plans to use dividend proceeds to fund “value-uplift opportunities,” including investment in organic growth, acquisitions, share repurchases and debt reduction. “This transaction gives us the opportunity to partially monetize cellulose derivatives and reallocate significant capital to higher-growth businesses within Celanese to accelerate our growth momentum,” says Mark Rohr, Celanese chairman and CEO. Rohr adds that the deal will should help “address investor anxiety over the future of our acetate tow business and will help shift attention to growth opportunities” in Celanese’s core acetyls and advanced engineered materials business.
Acetate tow is sold principally to major tobacco companies for use as filter tow in cigarettes. Celanese estimates global capacity for acetate two at roughly 800,000 metrics tons/year. Chinese supply and demand patterns have played an increasingly critical role in tow markets in recent years as China’s demand for cigarettes has flattened and a shift to self-sufficiency in acetate two resulted in sharp decline in imports since 2012. “The world of tow can be thought of in two parts – the first is the captive supply within China, and the second is the merchant market in the rest of the world which includes China imports,” Rohr said in prepared remarks to investors about the deal. “At its peak, China imported about 120,000 metric tons of tow [in 2012] but that amount sharply declined to approximately one-fifth of that in 2016 as Chinese capacity expansions came on stream. As a result, the global asset utilization rates serving the merchant market dropped from near 100% to 80%.”
The jv structure “combined with the dividend payout derisks and improves the future value proposition for our tow business while simultaneously monetizing and reallocating the capital,” Rohr said. “It also establishes various options for a potential exit from the business in a few years as synergies are realized.”
The completion of the jv is subject to regulatory approvals and customary closing conditions, which will determine the timing of close. Blackstone announced plans to acquire Solvay’s Acetow business in December 2016 and the deal closed on 1 June. The Acetow business had 2016 revenue of €531 million and EBIT of €116 million, according to Solvay.
By Robert Westervelt
Source: Chemical Week
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