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KKR Snaps up Chemical Units

Investment firm’s buy of four businesses will create large specialties player

April 26, 2004 | A version of this story appeared in Volume 82, Issue 17

Credit: Dynamit Nobel Photo
Dynamit Nobel specializes in production of advanced ceramic materials.
Credit: Dynamit Nobel Photo
Dynamit Nobel specializes in production of advanced ceramic materials.

Private equity investor Kohlberg Kravis Roberts & Co., majority owner of Rockwood Specialties Group, is backing Rockwood’s acquisition of four Dynamit Nobel chemical businesses for roughly $2.7 billion. KKR won out over competing bids from a variety of private investors and chemical companies.

The Dynamit Nobel businesses, which are now owned by MG Technologies, had sales last year of $1.8 billion. The amalgamated total will be more than triple Rockwood’s current annual sales of some $800 million.

The four units are CeramTec, which makes advanced ceramics; Chemetall, producer of surface treatment and lithium chemicals; Sachtleben Chemie, manufacturer of titanium dioxide, functional additives, and water treatment products; and the DNES Custom Synthesis business.

For MG Technologies, the deal is a giant step toward exiting the chemical industry, according to Chairman Udo G. Stark. It still has two units to shed: plastics for the automotive industry and chemicals distributor Solvadis.

MG agreed to the deal with Rockwood, Stark says, because “the combination of Dynamit Nobel and Rockwood will create a global leader in specialty chemicals and advanced materials.”

Rockwood itself was created in 2000, when KKR bought a set of businesses from Laporte, prior to that company’s acquisition by Degussa. Rockwood focuses on specialty chemicals for pigments, wood surface treatment, water treatment, clay, electronics, and advanced materials. It currently operates 40 facilities in North America, Europe, and Asia with a workforce of 2,500.

Rockwood CEO Seifi Ghasemi says that with the Dynamit Nobel businesses, “we will create a strong, profitable, and global specialty chemicals and advanced materials company.”

Reaching a critical mass in specialty chemicals is a goal of the deal, agrees Todd Fisher, partner and managing director at KKR. “We have been highly supportive of Rockwood to date and look forward to supporting the combined company to become a world leader in quality and innovation in the chemical industry,” Fisher says.

The purchase continues a spate of chemical acquisitions by private investors, who see an opportunity in companies that the stock market doesn’t value highly. Blackstone Group just won shareholder approval for its $3.8 billion purchase of Celanese. And chemical companies bought last year by private investors include Ondeo Nalco, SigmaKalon, and Kraton Polymers.

KKR already owns Borden Chemical, the Columbus, Ohio-based adhesives resins maker. KKR’s effort to build Rockwood into a sizeable specialties player is reminiscent of the work by Scandinavian venture capital fund Industri Kapital, which cobbled together Finnish specialty chemicals company Dynea. However, the fund’s subsequent efforts to create a Nordic specialties giant through a merger of Dynea with Kemira were unsuccessful.



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