Evonik has signed an agreement with One Equity Partners (JPMorgan's private commercial banking unit) to acquire US-based PeroxyChem for $ 625 million. PeroxyChem is a producer of hydrogen peroxide (H2O2) and peroxyacetic acid (PAA), and has a good market position in high-margin specialty applications.
"The acquisition of PeroxyChem will significantly enhance our growth sector's resource efficiency business. We are expanding our portfolio of environmentally friendly and high-growth specialty applications. In addition, we will acquire attractive businesses characterized by above-average growth , The capital intensity is moderate, and the periodicity is low. "—— Kurman, Chairman of Evonik Industrial Group.
"We are excited to join hands with Evonik to take today's successful business to the next level. The two companies' businesses complement each other and will provide our customers and employees with new and attractive growth opportunities." Bruce, President and CEO of PeroxyChem Lerner said.
Hydrogen peroxide and peroxyacetic acid are widely used and enjoy higher-than-average growth rates, especially in specialty chemical applications where the average annual market growth rate is as high as 6%.
PeroxyChem is headquartered in the United States, and its hydrogen peroxide and peracetic acid businesses focus on markets with higher levels of granularity and lower periodicity, such as environmental protection, food safety, and the electronic semiconductor industry. About three-quarters of the company's profits come from special applications in these areas.
"PeroxyChem's profitability is remarkable. Its adjusted EBITDA margin is about 20%, and its profitability continues to be higher than Evonik's current level. Its business growth is strong, its financial position is stable, and To generate considerable free cash flow. "-Ute Wolf, Chief Financial Officer of Evonik.
In fiscal 2018, PeroxyChem expects annual revenue of approximately $ 300 million and adjusted EBITDA of approximately $ 60 million. EBITDA profit margin will continue to be maintained at about 20%, which is attractive. Through the complementary advantages of production, logistics, and product mix, and the introduction of new technologies, Evonik expects that the combined global business will have a synergy effect of US $ 20 million and will be fully realized by the end of 2022.
The purchase price (corporate value) including synergy is approximately 7.8 times the annual adjusted EBITDA, and 10.4 times without synergy. The transaction is expected to be completed in mid-2019 after obtaining approval from relevant authorities.
The acquisition is expected to have a positive impact on Evonik's adjusted earnings per share and free cash flow in the first full fiscal year after completion. The funds for the acquisition have been raised through cash and confirmed credit lines.
Hydrogen peroxide and peracetic acid are widely used oxidants, such as bleaching agent used in the pulp industry, as a disinfectant used in food processing or wastewater treatment industries. Water is the only by-product of the hydrogen peroxide reaction and is therefore extremely environmentally friendly.
Thanks to its product properties, hydrogen peroxide is increasingly used in high-profile high-tech industries such as semiconductor manufacturing, medical applications, and aerospace technology. Logistics, long-term customer relationships, and diversified end-market applications make this business highly adaptable.
With over 100 years of history, PeroxyChem is an innovative manufacturer in the field of hydrogen peroxide and peracetic acid. The company is headquartered in Philadelphia, Pennsylvania, USA, and has approximately 600 employees and 8 production bases around the world. The main base is located in North America, and it also has production plants in Germany, Spain, and Thailand.
Evonik is one of the world's largest hydrogen peroxide producers. Its active oxide business line has decades of experience in producing hydrogen peroxide and related products, and has 13 production bases worldwide.