22:29 PM | October 10, 2013 | Vincent Valk
The pool and spa chemicals segment recorded $433 million in sales during 2012. KIK is a consumer, industrial and institutional products company with $1.2 billion in sales for 2012, and is owned by private equity firm CI Capital Partners (New York). The sale price of pool and spa chemicals represented a multiple of 7.8x the segment’s Ebitda. The pool and spa chemicals sale is expected to close by 31 December.
"Today’s announcements represent the next step in our plan to simplify and transform our portfolio, positioning us to better benefit from secular industry growth trends in our chosen areas of market focus and create a sustainable competitive advantage,” says Chemtura chairman and CEO Craig Rogerson. “Following the sales of our consumer products and antioxidants businesses, a sale of Chemtura AgroSolutions would transform Chemtura into a more focused, pure-play industrial specialty chemicals company with leading global positions that we believe can capitalize on attractive end-market growth trends.”
Chemtura expects to use “a substantial portion” of proceeds from both sales to return cash to shareholders. The company will also use the proceeds to pay down debt in order to bring debt down to its targeted ratio of 2 times (x) Ebitda.
The agricultural chemicals sale, meanwhile, could unlock significant value, Chemtura says. Rogerson says the company has received at least one unsolicited bid for the ag unit. “I don’t think agrosolutions is reflected in Chemtura’s current share price,” Rogerson said during an investor call on the announcements. Agricultural chemicals properties tend to trade at far higher Ebitda multiples than Chemtura’s current share prices represent, Rogerson adds. The agricultural chemicals segment recorded $435 million in revenues and $89 million in adjusted Ebitda during the 12 months ended 30 June. Chemtura has not announced a timeline for the sale, and says it will not sell the business if it does not attract a strong valuation. The company has retained Morgan Stanley and the law firm Debevoise & Plimpton to advise on the agricultural chemicals sale process.
Without the agricultural and pool and spa segments, Chemtura would have recorded $1.8 billion in sales and $228 million in adjusted Ebitda for the year ended 30 June, Rogerson says. The company’s two remaining segments, industrial engineered products and industrial performance products, focus on bromine derivatives and organometallics, and petroleum additives and urethanes, respectively. Chemtura has focused most of its capital spending on these businesses, totaling some $347 million since the end of 2010, according to Rogerson.
Chemtura also said today that bromine derivatives will continue to be challenged by weak demand for electronics and insulation in the third-quarter. The company expects the industrial engineered products segment, which includes bromine, to roughly break-even during the quarter. The industrial performance products segment, which includes petroleum additives and urethanes, is expected to quarterly record operating income similar to that of the third-quarter of last year, Chemtura says.