If you’re a private equity firm looking to exit chemical investments, you have a menu of options in today’s market. Choices on the table include a straight sale into a seller’s market, a dividend recapitalization supported by buoyant financing markets, and the elusive initial public offering (IPO).
The IPO route will be a popular one in the coming months as a number of chemical stocks have staged stunning rallies since hitting bottom at around March 2009 and have held up relatively well during the recent commodity asset downdraft.
The IPO window is somewhat akin to the famous huge and odiferous Indonesian “corpse flower” – never open for a long period of time, and when it shuts, it can remain shut for years.
Among those looking to go public are US-based specialty chemicals and materials company Momentive Performance Materials Holdings, which filed its S-1 registration statement with the US Securities and Exchange Commission on April 21.
US-based private equity firm Apollo Management has owned the many different assets comprising Momentive for years. It attempted to take one piece – Hexion Specialty Chemicals – public back in 2006 but pulled back because of tough market conditions. It has since combined Hexion with the former GE Silicones business to form today’s Momentive.
But today’s market looks ripe for an IPO attempt. One can look to the success of US-based Kraton Performance Polymers, which limped into the market in December 2009 at $13.50/share – a tough time for an IPO, but owners US-based private equity firms TPG Capital and J.P. Morgan Partners pulled it off. The shares hit a high of almost $48 in April but have pulled back to around $37.
There will be plenty of more IPO attempts to come. A number of other private equity-owned chemical companies are preparing for IPOs, according to sources in the financial community.
But IPOs are still limited to those chemical companies with the scale and exposure to growth markets that will interest investors. For many others, a straight sale would be the best option.
For all the latest deal activity and outlook, look out for our quarterly M&A update in the June 6 issue of ICIS Chemical Business.
Incidentally, the rare corpse flower at Ohio State University’s greenhouse in the US bloomed in April for the first time in 10 years.
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