InterviewPrivate equity sales to accelerate in 2011

28 July 2010 23:32  [Source: ICIS news]

Chemical asset sales may growBy Joseph Chang

NEW YORK (ICIS)--Private equity firms will accelerate their exit of chemical assets in 2011, an investment banker said on Wednesday.

“2011 will be a busy time for exits by private equity as market conditions improve and the timing aligns to meet their internal objectives,” said Tim Wilding, managing director and head of chemicals at US-based investment bank Oppenheimer.

In the mergers and acquisitions (M&A) heyday of the 2000s, fuelled by cheap and available financing, many private equity firms acquired chemical assets. And with most private equity firms having a 3-5 year time period for holding an asset, the timing is right to sell, said Wilding.

Private equity holders of major chemical assets include Apollo Management (which formed Hexion in 2005 and Momentive Performance Materials in 2006), Caryle Group (which acquired PQ in 2007) and Court Square Capital Partners (which acquired MacDermid in 2007).

One recent high profile private equity exit deal was Permira and Goldman Sachs Capital Partners agreeing to sell German specialty chemical company Cognis to Germany’s BASF for €3.1bn ($4.0bn) on 23 June.

And US-based chemical distributor Univar, owned by CVC Capital Partners, filed for an initial public offering (IPO) in the US on 30 June to raise up to $862.5m.

The filing followed BC Capital-owned chemical distribution firm Brenntag’s IPO in Germany in late March, where it raised €747.5m.

US-based Arizona Chemical has been put up for sale while private equity owner Rhone Capital pursued an IPO on a parallel track, according to multiple sources in the financial community.

“Any sponsor would rather sell outright than exit in an IPO, as the latter has an added element of uncertainty in terms of success and ultimate timing. It can take two years or more to fully exit after an IPO,” said Wilding.

“The broader US IPO market has had fits and starts in 2010, and investors are currently catching their breath. However, if third quarter earnings for the sector continue the recent positive historic trend, investors could renew their appetite for chemical equities,” he added.

($1 = €0.77)

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