PAI’s Perstorp Prepares for End of Decade-Long Buyout OwnershipAndrew Noel
Perstorp, the Swedish chemical maker that’s been in the hands of private equity for more than a decade, is putting the final touches to its strategy and structure ahead of a planned exit by current owner PAI Partners, according to the unit’s chief financial officer.
The Swedish maker of caprolactone used in sealants, which last year sold a coatings additives business, plans to divest a unit in Singapore and there are a couple of other assets generating about $230 million in combined sales that may be sold, CFO Johan Malmqvist said in an interview. Proceeds would be used to buy back bonds or repay mezzanine debt, he said.
Perstorp, based in the southern Sweden town of the same name, plans to expand in higher-margin products with a new neopentyl glycol plant under construction in China to serve local demand for plasticizers and paint ingredients. PAI’s exit is “imminent at some point” after buying the asset in 2005 from Industri Kapital. The buyout firm is waiting for the right moment in the company’s development and economic cycle ahead of Perstorp bonds maturing in 2017.
“We’re too Eurocentric right now,” said Malmqvist. “Lots of things have been done in terms of organizing our cost structure, especially during the financial crisis. We’re focusing on growing the business and earnings to help our owners achieve some type of exit.”
Management is considering the sale of formaldehyde and biodiesel operations that have 1.5 billion kronor in sales combined, said Malmqvist, who declined to comment on the timetable for any sales. By contrast, it’s entered a joint venture with CSM NV’s Purac division to develop more environmentally friendly polymers for use in plastics and coatings.
A sale of Perstorp to another private equity firm is unlikely, he added, leaving the other options of a trade buyer or an initial public offering.
There are competitors that would be able to generate cost savings by merging with Perstorp, though none is a direct match, he said. “That’s one pool of potential takers,” he said. “The other pool is emerging-market players who are interested in our technology, footprint and sales distribution network.”
Perstorp competes with BASF SE, Oxea and Eastman Chemical Co. in oxo chemicals, and with Lanxess AG in some polyols markets. In plasticisers, there’s some overlap with Arkema SA and Dow Chemical Co. Asian competitors include Mitsubishi Chemical Holdings Corp. and Hubei. The integrated nature of Perstorp means a break-up isn’t probable.
The Swedish chemical maker also has a joint venture with Thailand’s PTT Global Chemical PCL.
Having publicly traded bonds means the company is already “set up for a public environment” or trade sale, the CFO said. Perstorp partly refinanced mezzanine and senior debt with a sale of notes in November that trade on the Luxembourg stock exchange. Full-year sales dropped 1.1 percent to 10.53 billion kronor ($1.63 billion), producing earnings before interest, taxes, depreciation and amortization of 1.4 billion kronor.
Malmqvist joined Perstorp in 2009 from Duni AB, a Swedish serviette and tablecloth supplier he helped to list publicly for its private equity owners.
“I’ve made this journey once and I assume that that experience was part of the reason why I got hired,” he said. “It would be an interesting journey to do again.”