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PolyOne went from seller to buyer in big second-half deals

January 30, 2020
Chemical Value Chain

With two major deals that reshaped the company, PolyOne Corp. had the leading role in plastics materials mergers and acquisitions in the second half of 2019.

In August, Avon Lake, Ohio-based PolyOne sold its Performance Products and Solutions unit to private equity firm SK Capital Partners of New York in a $775 million all-cash deal. PP&S included a major PVC compounding business and had annual sales of around $700 million.

The PP&S business covered Geon-brand PVC compounds, which were one of PolyOne’s oldest legacy businesses. The materials first were made by rubber supplier B.F. Goodrich, which launched production of PVC resin and related compounds and end products in the 1920s before it began selling the materials to outside customers in the 1940s.

Then with the calendar about to flip to 2020, on Dec. 19 PolyOne announced plans to acquire the global masterbatch concentrates business of Clariant AG for $1.45 billion. The agreement followed months of speculation between Muttenz, Switzerland-based Clariant and Saudi Arabian conglomerate Sabic.

The PolyOne-Clariant deal is set for completion in the third quarter and values the Clariant business at about 11.1 times the annual earnings before interest, taxes, depreciation and amortization (EBITDA). PolyOne used some of the proceeds from the PP&S deal to fund its purchase of the Clariant business.

On a Dec. 19 conference call, PolyOne CEO, President and Chairman Robert Patterson said that the Clariant deal is “truly transformational” for PolyOne and will make the firm a $4 billion business that will be “truly global.”

Market watchers Kevin Hocevar and Bill Ridenour also approved of the deal. Hocevar, a market analyst with Northcoast Research in Cleveland, said in a research note that “in our opinion, [Clariant’s masterbatch business] has always been the holy grail for PolyOne, as it combines the company with its largest color/additive competitor … creating the unmatched global leader in the space.”

Plastics M&A veteran Bill Ridenour said in an interview with Plastics News that the PolyOne-Clariant deal is the best acquisition that PolyOne has made since its 2000 formation from the merger of Geon Corp. and M.A. Hanna Co.

“This acquisition makes PolyOne the overwhelming leader in specialty masterbatches in the world,” he said. “No one can touch them.”

Ridenour, president of Polymer Transaction Advisors in Foxfire, N.C., added that PVC “had been a detractor” for PolyOne, whereas the Clariant unit “will be an enhancer with long-term value.”

The PolyOne-Clariant deal includes the sale of Clariant’s global masterbatches business, with $1.1 billion in annual sales. Major markets served by the Clariant business include consumer, packaging and health care.

With the Clariant operations, PolyOne will add 46 manufacturing sites and technology centers in 29 countries and about 3,600 employees. They will be added to PolyOne’s Color, Additives and Inks segment.

PVC buyer SK, meanwhile, had become a major player in plastic additives through its acquisitions of part of Chemtura in 2013 and of SI Group in 2018. SK had operated the Chemura businesses as Addivant. The combined additives firm operates as SI Group.

By Frank Esposito

Source: Plastics News

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