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AkzoNobel to sell chemicals business to Carlyle Group, GIC for €10.1 billion

March 28, 2018
Energy & Chemical Value Chain

AkzoNobel on Tuesday announced the sale of its chemicals business to US-based private equity firm Carlyle Group and Singapore’s GIC for an enterprise value of €10.1 billion ($12.6 billion).

The move follows AkzoNobel’s decision in April last year to separate its operations into two focused businesses: paints and coatings, and specialty chemicals. AkzoNobel expects to complete the sale before the end of 2018. Private equity groups Apollo and Hal Investments, and consortia led by Bain and Advent were in the final running to buy the business.

The transaction values the AkzoNobel Specialty Chemicals business at an enterprise value of €10.1 billion, or almost 10 times its 2017 EBITDA. With €1.2 billion debt in the year-end balance sheet, AkzoNobel expects to receive a cash payment of €8.9 billion. Following deduction of deal- and separation-related costs, as well as other previously announced liabilities, including pensions, the net proceeds are expected to be about €7.5 billion. AkzoNobel says the vast majority of net proceeds—Bernstein Research (London) estimates about €6 billion—will be distributed to its shareholders.

AkzoNobel carried out a dual-track process for a possible demerger and a private sale but says that its management and supervisory boards concluded that a private sale to The Carlyle Group and GIC is in the best interests of AkzoNobel; the specialty chemicals business; and their respective stakeholders including employees, shareholders, and customers. “Today is a key milestone in creating two focused, high-performing businesses, to generate value for all stakeholders…We believe the business is well positioned to capture growth opportunities and further improve performance. Carlyle has significant experience in the chemicals industry…,” says Thierry Vanlancker, CEO of AkzoNobel.

Martin Sumner and Zeina Bain, managing directors at The Carlyle Group, add, “We are committed to growing the business, and building upon its innovation capability, [high-quality workforce] and asset base, as well as its world-class sustainability and environmental practices.”

Carlyle has extensive experience investing in chemicals, unlocking long-term potential and creating value in its portfolio companies, AkzoNobel says. Carlyle’s biggest current holdings in chemicals are Atotech and H.C. Starck. The company in the past also owned Axalta, PQ Corp., and Materis. GIC, formerly the Government of Singapore Investment Corp., is one of the three Singapore sovereign wealth funds. It was established to preserve and enhance the purchasing power of Singapore’s reserves via long-term investments overseas.

AkzoNobel Specialty Chemicals reported 2017 sales of €5 billion and EBITDA of €1.015 billion. Analysts say the specialty chemicals name flatters the business, with a quarter of its sales in industrial chemicals, notably the salt/chlor-alkali chain, and 18% in pulp and paper bleaching chemicals. Other product groups include ethylene derivatives and sulfur derivatives, including ethylene oxide derivatives and carbon disulfide; polymer chemicals, accounting for 36% of sales; and surfactants, accounting for 21%. Europe accounted for 47% of 2017 sales with North America accounting for 24% and APAC 17%.

The transaction is subject to customary closing conditions including the relevant regulatory approvals and consultation with relevant employee representative bodies. AkzoNobel obtained shareholder approval for the separation at an extraordinary shareholders’ meeting held on 30 November 2017.

By Natasha Alperowicz

Source: Chemical Week

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