Houston, Texas – Kraton Performance Polymers, Inc. is to acquire Arizona Chemical Holdings Corp. from its private owners for a cash purchase price of around $1.37 billion, Kraton announced 28 Sept.
Arizona Chemical is a global producer of performance products and specialty chemicals derived from non-hydrocarbon, renewable raw materials. It is owned by AZC Holding Co., LLC, which is principally owned by investment funds managed by American Securities LLC.
Houston-based Kraton said the acquisition offered a range of market synergies, particularly in areas such as adhesives, roads and construction, coatings and oilfield chemicals. The deal, it added, is currently expected to close in late 2015 or early 2016 – subject to regulatory and other approvals.
The acquired business will broaden Kraton's technology and market position and increase its profitability and cash flow, according to Kevin Fogarty, Kraton's president and CEO – adding that shareholders would benefit from “pre-tax synergies” of $65 million by 2018.
“Arizona Chemical has a stable and attractive margin profile, with adjusted EBITDA margins in excess of 20% over the past five years and an attractive cash flow profile. On a combined basis we expect to generate free cash-flow of more than $450 million over the first three years of combined operations, which will be available for debt reduction and allocation to stockholders,” Fogarty said
The Kraton boss added that the deal “creates new opportunities to deepen our customer relationships by expanding Kraton's presence in our core markets, where more than 50% of Arizona Chemical's sales are directed.
'In addition, given the renewable nature of Arizona Chemical's product and technology offerings, the complementary growth we foresee can be accomplished while reducing our overall exposure to hydrocarbon-based feedstocks.”
The $1.37-billion purchase price is subject to adjustment for cash and indebtedness at closing, as well as an adjustment for working capital and other items. Kraton said it would finance the purchase through debt facilities arranged with Credit Suisse Securities (USA) LLC, Nomura Securities International, Inc., and Deutsche Bank Securities, Inc.