Arkema's $570m ArrMaz buy pushes company closer to 80% specialties target – CEO

Source: ICIS News

2019/05/16

LONDON (ICIS)--The purchase of US-based surfactants producer ArrMaz is another step toward Arkema’s target of deriving over 80% of its revenues from specialty products by 2023, the CEO of the France-based chemicals firm said on Thursday.

Arkema HQ. Source: Arkema

Arkema agreed on Thursday to acquire the company, which produces surfactants for crop nutrition, mining and infrastructure markets, for $570m, from private equity firm Golden Capital, according to the Valence Group, which advised on the deal.

The company generated sales of $290m, with an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 18%, with close expected in summer 2019, pending regulatory approvals.

The EBITDA multiple of the deal stands at 10.8 times, but that should shift down to seven times by 2023, according to CEO Thierry Le Henaff.

"ArrMaz will be integrated in Performance Additives, one of the three strong pillars which will drive growth of the High Performance Materials division, along with Adhesives and Technical Polymers," the French producer said.

Arkema management has not discussed its surfactants business with the press to any great extent in recent years, Le Henaff said, but the company has strong vertical integration in the sector.

Synergies from the ArrMaz deal are estimated to be worth about $15m by 2023, pertaining mostly to purchasing and commercial complementarities between the two companies.

“I think what we bring in the picture is really the fact that we have an additive performance business including surfactants… we have significant geographic and technological synergies,” Le Henaff said.

The business has remained resilient during the last decade, he added, with stable earnings even in the aftermath of the global financial crisis.

However, Golden Gate reportedly acquired the business for $500m in December 2012, with a $570m selling price after nearly seven years of ownership representing a lacklustre return for a private equity firm, particularly in light of investments into the company during that time.

Le Henaff declined to comment on the the company’s performance during Golden Gate’s ownership period, but stated that absorbing the company’s specialisms into its existing surfactants and additives businesses would represent a strong platform for growth.

“This is the right timing for Arkema,” he said, noting that recent investments by ArrMaz into expanding in North Africa and the Middle East played well within Arkema’s additives growth plans.

Additional reporting by Pearl Bantillo

(Update re-leads, adds detail throughout, includes CEO comment)