FMC Corp. (FMC) hired Citigroup Inc. to find a buyer for its hydrogen-peroxide unit as the U.S. chemicals producer plans to simplify its business and accelerate a share-buyback program.
The process Citigroup is managing “is still progressing,” James Fitzwater, an FMC spokesman, said by phone today. FMC is including its silicates unit in the sale, he said. Fitzwater declined to comment on how much the sale may raise.
The hydrogen-peroxide business, which FMC calls peroxygens, may sell for $400 million to $450 million, or as much as eight times estimated earnings before interest, taxes, depreciation and amortization, Dmitry Silversteyn, an analyst at Longbow Research in Independence, Ohio, said today by phone.
FMC Chairman and Chief Executive Officer Pierre Brondeau is reorganizing the Philadelphia-based company into three main divisions to meet targets of $1.2 billion in profit and $5.5 billion of revenue by 2015. Brondeau said in May that FMC no longer considers the hydrogen-peroxide business to be a strategic fit and a buyer may be found by year-end.
Peroxygens mostly makes hydrogen peroxide used to bleach paper, as well as peracetic acid, a biocide used by the food industry, and persulfates, which are oxidizing agents used in polymer, electronics and energy markets.
The business posted about $340 million in sales last year and the margin on its earnings before interest, tax, depreciation and amortization is in the “mid-to-high teens,” Brondeau said in a May conference call. Proceeds from a sale will be important for FMC’s efforts to return cash to shareholders “more aggressively” in coming quarters, he said.
“It’s not a turnaround situation,” Brondeau said on the call. “It’s a business which returns cost of capital, which has good Ebitda margin and cash generation.”
Peroxygens is more valuable than competing businesses because FMC has expanded into higher-margin markets such as those serving electronics and the food and beverage industries, said Silversteyn, who has a hold rating on the shares. The unit gets about 40 percent of its sales from the pulp- and paper-bleaching market, compared with 60 percent for the hydrogen-peroxide industry as a whole, he said.
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