Evonik has reached an agreement to acquire Air Products’ performance materials business, a producer of specialty intermediates and coatings additives, for $3.8 billion in cash.
The business generated $1.0 billion in revenue and $241 million of adjusted Ebitda over the twelve months ending 31 March. The deal values the business at 15.8x adjusted Ebitda and 3.7x sales.
The business includes epoxy curing agents, 40% of revenues, polyurethane additives, 32%, and specialty additives, 28%. The sale is expected to close before the end of 2016. Air Products says continues to pursue a spin-off its remaining non-gases business in electronic materials as a separate public company, called Versum Materials. Air Products is on track to separate Versum by the end of September 2016.
“Evonik is already one of the leading producers of specialty and coating additives,” says Klaus Engel, CEO of Evonik Industries. “Air Products’ additives business perfectly complements this fast-growing segment.” Evonik says the combined specialty coating additives business has a turnover of around €3.5 billion ($4.0 billion) and Ebitda margin of more than 20%. Evonik expects to generate cost synergies of $60 million/year by 2020 at the latest. The company expects an additional $20 million in incremental revenue synergies by combining the business.
Half of the outlay for the acquisition will be financed from Evonik’s own funds, the other half with additional debt, Evonik says.
Air Products announced in September 2015 that it would divest its performance materials and electronic materials business. “As a result of these moves, Air Products will be in an even stronger position to take advantage of the exciting investment opportunities to grow our core Industrial Gases business,” says Air Products chairman and CEO Seifi Ghasemi. Air Products says it expects after-tax proceeds of $2.8 billion and will use $500 million of those proceeds for debt repayment. Air Products says the sale of performance materials and spin off of Versum will provide roughly $2.8 billion in capital deployment capability to invest in its core industrial gases business after expected debt pay downs.
“The transactions are on track with our five-point plan [created in 2014 to create shareholder value] and goes a long way in accomplishing that goal,” Ghasemi said on Air Products’ materials technologies update call on 6 May. The divestitures will free up $2.8 billion in cash for the company, which will be used to “pay off debt to maintain current credit ratings, invest in significant growth opportunities and look for creative acquisitions while continuing to pay current dividends and increase in the future, while any additional cash will be used to buy back shares and return money back to shareholders.” The company says that the transactions will make Air Products the “most profitable industrial gas company in the world” and its next goal is to focus on “being the safest in the world.”
By Robert Westervelt and Jing Chen
Source: Chemical Week
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