Indorama Ventures (Bangkok) and Performance Fibers (Huntersville, NC), a leading producer of industrial polyester fibers and fabrics, today announced that they have signed a definitive agreement, under which Indorama will acquire the Asia manufacturing operations of Performance Fibers. Financial terms of the agreement were not disclosed. Indorama will acquire the Asia operations of Performance Fibers from an affiliate of private investment firm Sun Capital Partners (Boca Raton, FL). The transaction is expected to be completed within the first quarter of 2015 subject to regulatory approvals. Indorama will have the right to continue using the name Performance Fibers.
The Asia business of Performance Fibers is a leading producer of polyester tire cord fabric in Asia, and its manufacturing plants are located at Kaiping in Guangdong Province, China, with a production capacity of 41,000 m.t./year of polyester tire cord fabric and 48,000 m.t./year of polyester tire cord yarn. The plants are located close to Indorama’s existing polyethylene terephthalate (PET) polymers facility at Kaiping and will provide synergy in the raw material supply chain, Indorama says. Performance Fibers’ Asia business is the second largest producer of polyester tire cord fabrics in China, Indorama says. Asia is the largest and fastest growing market for polyester tire cord fabric, accounting for more than 50% of global demand in 2013 with CAGR of 8% over the last four years, Indorama says. The Asia business of Performance Fibers has a 17% market share in China and 9% market share in Asia, and the business has a strong management team which will be retained following the completion of the acquisition, Indorama says.
“This acquisition is a great strategic fit for Indorama,” says Aloke Lohia, CEO of Indorama. “We are acquiring a company that has an established premier position in the life-critical end-use applications in the tire industry across the world. The company has a proven management team with a track record of value creation, expanding the business at 17% CAGR over the last four years. Our specialty polymers, fire retardant yarns, and airbag yarns businesses together with Performance Fiber Asia’s tire fabrics will create scale as well as operational and technical leverage to firmly place Indorama amongst the leading brands in automotive safety applications worldwide. With the continued growth of China, India and all emerging nations, the industry growth outlook for tires remains very attractive especially as radial tires’ importance is increasing for fuel efficiency and passenger comfort,” Lohia says.
This acquisition of the Asia operations of Performance Fibers will bring together a broad and complimentary portfolio of automotive safety products together with Indorama’s Trevira (Bobingen, Germany) subsidiary, a leading producer of high end polyester fibers and yarns for automotive interiors, and PHP Fibers (Wuppertal, Germany) subsidiary, which is Europe’s largest producer of nylon-6,6 industrial yarn for airbag application, tires, and mechanical rubber goods and is a leading producer of polyester industrial yarns. These three businesses will have combined annual sales of at least $850 million, Indorama says.
Performance Fibers, earlier this year, launched a major business transformation effort that included footprint rationalization in North America, modernization of equipment in both North American and Europe, step-change improvements in product quality, and the creation of a product development center of excellence.
“The sale of our Asia operations fits well with and enhances our consolidation of resources to focus on our core business and accelerate our corporate transformation initiatives,” says Wahid Tawfik, CEO of Americas & Europe at Performance Fibers. “The sale will further strengthen our financial position and, more importantly, accelerates our modernization, quality and innovation investments,” Tawfik says.
The Performance Fibers business in Europe and the Americas will continue to operate separately under the ownership of Sun Capital and the leadership of the existing management team in those regions.
By Deepti Ramesh