Cytec Sells Coating Business to Advent for $1.03 Billion

Cytec Industries Inc. (CYT) agreed to sell its coatings unit to private-equity firm Advent International Corp. for $1.03 billion to focus on more profitable businesses that make carbon-fiber composites and chemicals.

The transaction is expected to close in the first quarter, Woodland Park, New Jersey-based Cytec said today in a statement. Advent, based in Boston, also will assume liabilities of $118 million.

Cytec, the world’s second-biggest producer of carbon-fiber materials for airplanes, said in May that it would sell its coating resins unit, its largest by revenue, to focus on metal- processing chemicals and composites. It hired JPMorgan Chase & Co. as a financial adviser in January to review options. The bank advised on the purchase by Advent.

“The timing and total value of the transaction lie at the upper end of our expectations,” Michael J. Sison, a Cleveland- based analyst at Keybanc Capital Markets who recommends buying the shares, said in a note. Cytec is “divesting low-margin businesses and focusing its growth on its higher margin franchises.”

The deal’s enterprise value of $1.15 billion, which includes net debt, is 7.8 times 2011 earnings before interest, taxes, depreciation and amortization from the coatings unit, and 6.9 times estimated 2012 Ebitda, Sison said. He had estimated the unit would sell for $600 million to $1.2 billion.

Buyback Program

Chemical deals larger than $100 million announced this year had a median Ebitda multiple of 7.2, according to data compiled by Bloomberg.

Cytec fell 0.9 percent to $64.09 at 1:39 p.m. in New York. The shares have gained 43 percent this year.

The resins produced by the Cytec unit are used in coatings for cars and in food and beverage cans. Advent plans to boost the segment’s sales and earnings partly by raising output in Asia and other emerging markets, the private-equity firm said today in a statement on its website.

Cytec’s coatings business is based in Brussels with operations in Europe, the U.S. and Asia, Advent said. The segment accounted for $1.55 billion of sales, or 50 percent of total revenue, in 2011, according to data compiled by Bloomberg.

The board of Cytec also approved an additional $452 million stock buyback, taking the total repurchases now authorized to $650 million, the company said in a separate statement. The buyback will be funded with some of the proceeds from the coatings sale, it said.

Cytec has been adding to its composites and separations businesses. It acquired Umeco Plc, a U.K.-based producer of composite materials used in planes and cars, in July. In April, Cytec bought manufacturing assets of India’s Star Orechem International Private Ltd. to help expand output of chemicals uses to separate copper from mined ore.

(Cytec scheduled a conference call at 2 p.m. New York time, which can be accessed +1-888-894-3692 or +1-706-902-4297, pass code 39651541.)

To contact the reporter on this story: Jack Kaskey in Houston at jkaskey@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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