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Clariant Acquires Sued-Chemie for $1.9 Billion in Cash and Stock

The Sued-Chemie AG headquarters stand in Munich. Source: Sued-Chemie AG via Bloomberg
The Sued-Chemie AG headquarters stand in Munich. Source: Sued-Chemie AG via Bloomberg

Feb. 16 (Bloomberg) -- Clariant AG agreed to buy private equity-owned Sued-Chemie AG for 1.4 billion euros ($1.9 billion) in cash and stock to expand in chemical catalysts used in the oil and automotive industries.

The Swiss maker of plastic additives will acquire a 50.4 percent stake from One Equity Partners LLC, JPMorgan Chase & Co.’s buyout arm, and has agreed to buy shares from family investors to take its stake to “slightly above” 95 percent, Clariant said in a statement today. One Equity will get 121 euros a share, compared with yesterday’s close of 126 euros.

Clariant shares fell as much as 14 percent because of investor concern that Chief Executive Officer Hariolf Kottmann is paying top dollar to buy Sued-Chemie and diversify so soon after completing an overhaul. Sued-Chemie, whose sales and margins held steady during the financial crisis, will add 1.2 billion euros to Clariant’s sales, a boost of about 22 percent.

“We are surprised a little by the timing and view the exit multiples as full,” said James Knight, an analyst at Barclays Capital. “However, we think Clariant’s management remains underestimated, and back them to use proven cost-cutting skills to extract synergy.”

Clariant agreed to a 700 million Swiss-franc ($723 million) share exchange with family shareholders of Sued-Chemie. It will also seek to raise 400 million francs in a rights offer and 900 million francs in debt financing. Clariant investors will forego a dividend payment on 2010 earnings. Barclays’s Knight in a note referred to the financing as “exceptionally conservative.”

Shares of Muttenz-based Clariant fell as much as 2.48 francs to 14.98 francs and they traded at 15 francs as of 12:08 p.m. in Zurich. Munich-based Sued-Chemie last traded at 126 euros.

Opportunity Knocks

The transaction comes as Kottmann brings an end to major restructuring. The maker of paint pigments, which closed plants and cut jobs, ended 2010 almost debt-free, with an opportunity to acquire a business in a new market with higher growth prospects and less exposure to economic cycles.

Clariant, advised by Morgan Stanley, paid the equivalent of 10.5 times earnings before interest, taxes, depreciation and amortization. The median Ebitda multiple for 104 specialty chemical deals announced in the past 12 months was 7.1, according to Bloomberg data. Debt of about 500 million euros brings the transaction’s enterprise value to 2 billion euros.

The “pro-forma new Clariant looks expensive,” said Tim Jones, an analyst at Deutsche Bank. “The investment case for Clariant has been cost cutting and portfolio optimization, not large-scale M&A, and we see this deal as increasing complexity,” Jones and colleagues said in a note.

‘Competitive Process’

Kottmann, 55, said the sale process was “competitive,” and a pledge to keep Sued-Chemie intact helped give Clariant the edge over other catalyst makers. Albemarle Corp., alongside Umicore SA and Honeywell International Inc., were among those interested in Sued-Chemie, three people familiar with the matter said Dec. 22.

“Our real advantage compared to other companies bidding for Sued-Chemie was that we always said we didn’t want to split the company into different parts,” Kottmann said on a conference call. “The transaction is not an adventure, it’s a logical next step.”

Clariant’s “unique” proposal, which included support for developing products like lithium-ion batteries, helped unlock the stake held by the Winterstein, Stockhausen and Schweighhard families, who had no real interest in selling and wanted to remain involved in the company, Chief Financial Officer Patrick Jany said in an interview today.

Profit Restored

Kottmann, who took the helm in October 2008, and Jany overhauled Clariant to boost efficiency and lift margins. The world’s biggest maker of printing-ink chemicals returned to profit last year, with net income of 191 million francs. It predicted a “stable business environment” for its existing activities in 2011.

“Clariant has gone through a big change over the past couple of years,” said Jany in the interview. “The restructuring was hard on everybody, but now we have a good base to really build the business. People are proud of increasing the performance and everybody is behind this move.”

To contact the reporters on this story: Andrew Noel in London at; Matthias Wabl in Zurich at

To contact the editor responsible for this story: Benedikt Kammel at

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