Cytec Industries Inc. (CYT), the world’s second-biggest producer of carbon-fiber materials for airplanes, plans to sell its largest business unit by revenue to focus on metal-processing chemicals and composites.
JPMorgan Chase & Co. is assisting with the sale of the coating resins business, which makes chemicals used in paint, Woodland Park, New Jersey-based Cytec said today in a statement. The company plans to complete the transaction by the end of the year.
Cytec hired JPMorgan in January to review options for the unit amid slowing demand for products such as liquid-coating resins, radiation-cured resins and powder-coating resins, which are used in coatings for cars, and food and beverage cans.
Cytec may get $675 million to $900 million for the unit, Michael Sison, a Cleveland-based analyst at KeyBanc Capital Markets Inc., said today in an e-mail. Possible buyers include private equity and coatings companies, particularly in Asia, he said.
“We have improved confidence a coating resins sale is coming in second half 2012,” Sison, who recommends buying Cytec shares, said separately in a note.
Cytec rose 4.6 percent to $59.01 as of 11:13 a.m. in New York. The shares have gained 33 percent this year.
Coating resins accounted for $405 million, or 52 percent, of the company’s sales in the first quarter, according to data compiled by Bloomberg. The unit had operating income, or sales minus the cost of goods sold and administrative expenses, of $28.8 million in the period, compare with overall earnings of $86.3 million.
The unit has the potential for annual earnings before interest, taxes, depreciation and amortization of $150 million to $200 million and could sell for 4.5 times to 6 times Ebitda, Sison said. The price likely wouldn’t top $900 million, he said.
A sale at for $675 million, or the low end of that range, would be the world’s fifth-biggest coatings transaction in at least a decade, according to data compiled by Bloomberg. The average Ebitda multiple of 36 deals in the period was 10, the data show.
Cytec has been adding to its composites and separations businesses. It agreed to acquire Umeco Plc (UMC), a U.K.-based producer of composite materials used in planes and cars, last month for about 274 million pounds ($432.6 million). Also in April, Cytec bought manufacturing assets of India’s Star Orechem International Private Ltd. for 1.85 billion rupees ($33.6 million) to help expand output of chemicals uses to separate copper from mined ore.
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