Evonik signed an agreement to sell its methacrylates business to Advent International for $3.39bn. The selling price (enterprise value) is 8.5 times the business’ EBITDA. The transaction is subject to approval by the authorities in several countries and is expected to close in the third quarter of this year.
The methacrylates business has 18 production sites and 3,900 employees worldwide. From 2016 to 2018, the business generated an average annual EBITDA of about $395.59mn and sales of about $2.03bn per year. For 2019, Evonik expects sales and EBITDA at a similar level.
The transaction comprises the methacrylates, acrylic products and CyPlus business lines, and some of the methacrylate resins activities. Evonik put these operations on the market as part of its systematic strategy of sharpening its focus on specialty chemicals, which are less cyclical. Private equity company Advent International is one of the most experienced financial investors in the chemical industry in the world, with more than 30 investments over three decades.
The net purchase price (equity value) can be calculated after deductions, made up primarily of pension obligations of around $565.03mn. Evonik will use the sale proceeds to strengthen its balance sheet and, above all, for targeted growth projects. That includes funding the purchase price of the US company PeroxyChem, which Evonik plans to close this year.
In addition, some funds will be used to strengthen the present specialty chemicals portfolio, for example, by building a new polyamide 12 plant in Marl, Germany. These businesses generate an attractive margin and an above-average cash flow. Also, in 2019 and even without the contribution from the methacrylates business, Evonik will be able to cover the dividend payment out of its strong free cash flow.
“This transaction will fuel the growth of the methacrylates business and allow Evonik to focus more on its core business, specialty chemicals.The deal further strengthens the position of the company globally, and as a region, we have taken all the necessary preparations for the next steps to ensure a smooth implementation,” said Hendrik Shoenfelder, regional president for Evonik Middle East and Africa.
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