Private equity chemical sales to increase in 2011

12 November 2010 18:24  [Source: ICIS news]

By Joseph Chang

NEW YORK (ICIS)--More private equity firms will seek to exit their chemical investments in 2011 on improved M&A market conditions and an improved IPO (initial public offering) market, an investment banker said on Friday.

“There is a pent-up supply of assets in financial sponsor hands that need to come out, so there will be pressure to sell or exit,” said Leland Harrs, managing director at US-based investment bank PrinceRidge Group.

“On the buy side, the money’s out there. Strategic buyers and sponsors have lots of cash. Lenders and lending and the high-yield market is on fire, so that will drive activity,” he added.

The banker expects more private equity sales of chemical assets to private equity buyers, as strategic buyers are being very selective, mainly looking for bolt-on acquisitions that fit their existing businesses.

“We’ll continue to see a good amount of sponsor-to-sponsor activity. A lot of deals are going from one sponsor to another because they are not perfect fits for strategic buyers,” said Harrs.

On 27 September, private equity firm Rhone Capital sold a 75% stake in US-based pine chemicals producer Arizona Chemical to American Securities, another private equity firm.

On 2 September, private equity firm CVC Capital Partners sold a 42.5% stake in US chemical distributor Univar to private equity firm Clayton, Dubilier & Rice.

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Author: Joe Chang

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