SK Capital to target chemical carve-outs with new $1bn fund

Interview article by Joseph Chang

NEW YORK (ICIS)–Private equity firm SK Capital Partners is targeting chemical carve-out, or orphan businesses with its new $1bn fund, its managing director said on Tuesday.

“We will invest primarily in carve-outs of chemical businesses where we think there is an opportunity to help the current owner – typically a multinational company – create value for its shareholders and where we can devote the time and resources to improve and grow those assets,” said Barry Siadat, founder, president and managing director of SK Capital.

SK Capital is not a “typical financial buyer” that loads up on debt financing to acquire chemical assets. It avoids asset auctions, he said.

“That is not our model. We use a conservative capital structure to grow the business and improve performance – by building a team and product development strategy, giving it some TLC,” Siadat said.

SK Capital earlier today announced the close of its new fund SK Capital Partners IV, LP with total limited partner commitments of $1bn.

While it looks for businesses that can be carved out of larger companies, SK Capital is not interested in Dow Chemical’s chlorine and derivatives businesses, he noted.

SK Capital is targeting more specialty chemical businesses that have “lost their edge” and become niche commodities. Since 2012, it has acquired additives businesses.

In October 2014, it agreed to acquire BASF’s textile chemicals business, rolling it up into Archroma which consists of the textile chemicals, paper specialties and emulsions businesses it acquired from Clariant in October 2013.

In May 2013, SK Capital acquired the antioxidant and UV stabilizer business of Chemtura, renaming it Addivant.

“We want to focus on areas that are benefiting from the resurgence in ethane/propane raw materials in the US from shale gas. This includes additives to help plastics or other derivatives that come out of these raw materials,” said Siadat.

SK Capital has built a portfolio of chemical assets with annual sales in the mid-$8bn/year range, he noted. This includes butadiene (BD) and C4 specialties producer TPC Group, nylon producer Ascend Performance Materials, liquid sulfur dioxide producer Calabrian and Aristech Acrylics.

SK Capital is not looking to sell any of its businesses yet, said Siadat.

“They are generating a lot of cash and returns through dividends,” he said.

“We are positioning ourselves as a chemical company focused on building and creating value, and we’re excited to have this extra $1bn in equity,” said Siadat.