June 21 (Bloomberg) -- Cabot Corp., a U.S. maker of carbon black used in rubber tires, agreed to buy Norit NV for $1.1 billion to become the largest producer of activated carbon, which is used to cleanse smokestack emissions and water.
Private-equity firms Doughty Hanson & Co. and Euroland Investments BV are selling Amersfoort, Netherlands-based Norit. Cabot will finance the deal with $200 million in cash, $300 million from an existing credit facility and about $600 million of long-term debt, the Boston-based company said today in a statement. The purchase should close in 2012 and add 20 cents to 25 cents to earnings in the fiscal year that begins in October, Cabot said.
Buying Norit would be Cabot’s biggest deal, according to data compiled by Bloomberg. Cabot Chief Executive Officer Patrick Prevost is expanding the company’s portfolio of molecularly engineered carbon products to include materials that remove mercury from coal-fired power plants and impurities from water. Closely held Norit, which competes with Calgon Carbon Corp., has half the North American market for carbon used to clean air emissions, Prevost said today on a conference call.
“This acquisition supports the ongoing transformation of our portfolio to a higher margin, less cyclical, specialty chemicals focused company,” Prevost said in the statement. “Norit is a natural extension of our core R&D.”
Cabot fell 3.8 percent to $36.51 in New York.
The deal is the sixth-biggest announced this year in the chemical industry, according to data compiled by Bloomberg. The largest is Eastman Chemical Co.’s $4.5 billion purchase of Solutia Inc., which was announced in January, the data show.
Norit’s earnings before interest, taxes, depreciation and amortization were $92 million last year, according to Cabot. That means Cabot is paying 12 times Norit’s Ebitda, about twice the 5.9 times average multiple of 18 chemical deals announced this year, according to data compiled by Bloomberg.
Norit produces activated carbon from non-petroleum raw materials, which according to John Shea, a Cabot spokesman, include lignite, peat, and coconut and olive pits.
The Dutch company uses heat or chemical treatments to make the product microscopically porous, enabling it to absorb contaminants in air or liquid, Prevost said. Activated carbon also has uses as a catalyst in the manufacture of herbicides and specialty metals, he said.
About 60 percent of Norit’s sales are in North America and most of the remainder is in Europe, Prevost said. The biggest market for activated carbon is air purification, followed by water, food, pharmaceuticals and chemicals, Cabot said today in a presentation. Cabot said it will retain Norit CEO Ronald Thompson.
Norit said in March that it planned to raise $200 million by selling shares to the public and listing them on the New York Stock Exchange. The company posted a net loss of $5.7 million last year on sales of $360.3 million, according to its IPO prospectus.
The deal provides Cabot with about $50 million in tax savings accumulated from Norit’s net operating losses, and no cost savings are anticipated, Cabot said.
JPMorgan Chase & Co. is Cabot’s financial adviser. The company’s legal advisers are Wachtell, Lipton, Rosen & Katz, De Braw Blackstone Westbroek NV, and Slaughter and May.
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