SK Capital Said to Hire Ex-Croda, Kemira CEOs for Chemicals

SK Capital Partners LP has hired Michael Humphrey and Harri Kerminen, former chief executives of Croda International Plc and Kemira Oyj respectively, to help advise on specialty chemical investments, according to people with knowledge of the situation.

Humphrey and Kerminen will become directors and provide strategic and operational expertise to SK Capital’s portfolio of companies as well as advise on future acquisition targets and deal due diligence, said the people, who asked not to be identified because the appointments have yet to be made public.

SK Capital’s strategy has centered on building chemical businesses with assets divested from larger companies. It put together units from BASF SE and Clariant AG to form textile- and paper-chemical supplier Archroma. That industry is undergoing restructuring with companies including Huntsman Corp. shifting production lines to Asia to be closer to customers.

Under Humphrey, Croda quadrupled its market value to almost 4 billion pounds ($6.1 billion) over a five-year period, making the U.K. company the world’s second-largest cosmetic ingredient maker. Kerminen, during his tenure at Kemira, refocused the Helsinki-based company on more profitable markets for its water-treatment additives used in industrial waste.

“In hiring CEOs, private equity can buy expertise and relationships,” said Joachim von Hoyningen-Huene, a partner at AT Kearney. “Not all chemical assets are tendered out and there can be a clear first mover advantage if PEs can approach a chemical company and discuss certain assets which are non core.”

M&A Outlook

In some cases, managers of a chemical company have no interest in making public that a certain part of the portfolio is no longer core until they are very close to finalizing the deal, von Hoyningen-Huene said.

SK Capital is focused on investments in the specialty materials, chemicals and health-care industries.

A trend for companies to sharpen their focus and concentrate on higher-value-added products will continue in 2015, according to AT Kearney, which published the results of a survey of executives and investment bankers working in the chemical industry. Portfolio reshaping and disposals will be a main driver of acquisitions in 2015, it predicted.

“Financial investors will continue to have very good conditions that will help them, with cheap and abundantly available financing, but the situation of the strategics has improved as balance sheets are stronger and the economic uncertainty is a little bit less,” AT Kearney’s von Hoyningen-Huene said.

M&A Pause

Activist investor pressure, which has already helped bring about portfolio reviews at Dow Chemical Co., DuPont Co. and Ashland Inc., has the potential to spread from the U.S. to other regions, including Europe, because of increasing fund sizes and a scarcity of underperforming assets, AT Kearney said.

If current low energy prices persist, that could eventually increase M&A activity in Europe and Asia, according to PricewaterhouseCoopers LLP.

“We expect to see a pause in the near future as investors wait to see if lower energy prices are a long-term shift,” Pam Schlosser, PwC’s U.S. chemicals leader, and global chemicals leader Antoine Westerman said in a report.

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