Yule Catto pays Clariant £55m for full control of Harco

Author: Neil Sinclair


LONDON (CNI)--British specialty chemicals company Yule Catto has acquired full control of Harlow Chemical Company (Harco), the UK supplier of emulsions and PVC stabilisers.

Yule Catto said Tuesday it has agreed to pay £54.6m ($78m/Euro88m) to Swiss chemicals company Clariant, its joint venture partner, for the 50% of Harco it did not already own.

The acquisition will be earnings enhancing in the first 12 months, said Yule Catto.

Yule Catto said the purchase price represents an enterprise value (EV) to earnings before interest, depreciation and amortisation (EBITDA) ratio of eight and will be paid in cash from existing credit facilities. Harco's net assets as of 31 December last year were £18.4m and aggregate borrowings were £10.1m.

Last year, Harco made a pre-tax profit of £11.5m on a turnover of £70.8m. It employs about 300 people and has manufacturing sites at Harlow in Essex, Stallingborough on the Humber estuary and Batley in Yorkshire.

Yule Catto chief executive Alex Walker described the acquisition as another important step in his company's development of a global presence and manufacturing capability in water-based polymers.

"We have been able to take this important step on sensible financial terms, and with 100% control of the Harco business we can now release its full potential utilising the experience and expertise of the existing management," he said.

Walker pointed out that the Harco deal follows the purchase of full control of the styrene-butadiene (SB) latex operations of Synthomer.

Yule Catto finance director Sean Cummins told CNI today that the deal with Clariant removed restrictions on Harco's expansion outside the UK.

He explained that Harco had unique acrylic-based polymer technology would could now be used as a spring-board for growth in mainland Europe. Cummins said that Harco had a leading position in the UK market for emulsions used in paint and adhesive applications. "But the largest market place is in [mainland] Europe."

Cummins said that Harco only needs to gain a small share of the European market to achieve double-digit growth. He said Harco could initially serve a growing European market from its UK facilities.

"But in time we would need to expand manufacturing capacity in Europe." This was most likely to be achieved by expanding or modifying Yule Catto water-based polymers manufacturing facilities. It has sites in The Netherlands, Belgium and Germany, said Cummins.