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Report: Albemarle exploring options for Chemetall

May 17, 2016
Energy & Chemical Value Chain

Albemarle has appointed Bank of America to advise it on the future of Chemetall (Frankfurt), a company active in the surface treatment business that Albemarle acquired last year with the purchase of Rockwood Holdings, according to Bloomberg, citing people familiar with the matter. Albemarle would use the proceeds to pay down debt following the $6.2-billion acquisition of Rockwood. In 2014, Chemetall reported sales of $826 million. It has 2,500 employees and operates in 22 countries.

Chemetall produces coatings for the chemical treatment of metal surfaces. Its products are developed for cleaning, giving corrosion protection, sealing, improving paint adhesion, and facilitating the forming and treatment of metals.

Chemetall received interest from buyers as a standalone entity prior to Rockwood’s merger with Albemarle, which closed in January 2015. In June 2014, a month prior to the announcement of the merger, Rockwood received interest in the surface treatment from two potential buyers, according to regulatory filings. One interested buyer was a private equity firm, while the other called “Company A” in the filing, proposed acquiring the business for $2.25-$2.5 billion. “Company A” initially stated that it had no interest in acquiring all of Rockwood, although it later reconsidered this position. Rockwood at the time was engaging with several interested buyers, mostly specialty chemical producers, in a sale process that resulted in the deal with Albemarle.

Shortly after the Rockwood deal closed in early 2015, Albemarle announced plans to divest three businesses – mineral-based flame retardants, fine chemicals and metal sulfides – with combined annual revenues of about $550 million. Many of these businesses have since been sold. However, last week Albemarle said it will retain its fine chemistry services business, a contract manufacturer of active ingredients in fine chemicals, as offers for the business did not meet Albemarle’s expectations. The fine chemistry services business will be run as a standalone segment of the company.

The Chemetall surface treatment business posted 8% year-on-year (YOY) sales growth during the first quarter, with quarterly sales totaling $208 million and quarterly Ebitda at $53 million. Volumes grew in the automotive component and coil markets, while prices also improved. The business has expanded over the past year, acquiring joint ventures in China, and its quarterly results have generally been solid.

The coatings sector, including surface treatment, has seen significant consolidation over the past several years, with major players such as PPG, AkzoNobel, and Sherwin-Williams making acquisitions large and small. Sherwin-Williams’ $11.3 billion acquisition of Valspar is expected to close by the first-quarter of 2017. PPG is aiming to deploy $2-$2.5 billion on acquisitions and share buybacks in 2015 and 2016.

Albemarle has declined to comment on the rumors,

By Natasha Alperowicz and Vincent Valk

Source: Chemical Week

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