Issue Date: March 31, 2008
Sweden's Perstorp Springs Ahead
THE MANAGERS OF PERSTORP have been given a mission by the firm's private equity owners: grow, and grow quickly, in a few chosen segments in the global specialty chemicals industry. And that is precisely what is happening.
The Swedish company has embarked on a flurry of acquisitions to beef up a business portfolio that has polyol chemistry at its core.
The firm's latest deal, announced in mid-March, is also its biggest: intertwined agreements to take over Rhodia's line of aliphatic isocyanates and LyondellBasell's business in aromatic isocyanates. Aliphatic and aromatic isocyanates are reacted with polyols to produce industrial paint ingredients and flexible foams, respectively. The purchase includes plants in France and Texas and will add $460 million to Perstorp's 2007 sales of about $1.27 billion.
In February, Perstorp wrapped up its purchase of Solvay's caprolactones business for nearly $310 million. The acquisition covered a plant in Warrington, England, a business with 2006 sales of about $90 million, and 65 employees. Perstorp plans to double production capacity for caprolactones and derivatives because they "are utilized in the same applications as Perstorp's polyols, offering interesting synergy opportunities," the company says in its 2007 year-end report.
In January, Perstorp announced an agreement with China's Zibo Linzi Yongliu to acquire the country's second-largest neopentyl glycol plant, located in Zibo City in the eastern province of Shandong. Perstorp bought a 51% share in a trimethylolpropane plant in Zibo City a year earlier. Together, the deals bolster Perstorp's claim to be the largest global supplier of neopentyl glycol and trimethylolpropane.
Moreover, Bo Dankis, Perstorp's president and chief executive officer, says the China deals put the company halfway toward its 2010 goal of "1 billion Swedish crowns"—roughly $150 million—in Chinese sales.
In October 2007, Perstorp acquired the biobased oil business of the Swedish firm TallOil. Perstorp already runs what it calls Scandinavia's largest plant for the biodiesel fuel rapeseed methyl ester (RME). TallOil's business in biofuels such as pine tar "has the potential of boosting overall sales of our biofuel products" to as high as $300 million, Dankis says.
A month earlier, Perstorp acquired Lonza's purified isophthalic acid business in Singapore for $138 million. And in June 2007, the company formed a venture with Saudi Arabian formaldehyde producer Chemanol to build a pentaerythritol plant in Al-Jubail, featuring Perstorp technology. Chemanol will be responsible for production, whereas Perstorp will market the output through its established sales channels.
THOSE ACQUISITIONS come at a cost, of course. Perstorp posted a 2007 loss of $18.9 million on sales of $1.27 billion. For Dankis, however, the significant investment in the future is worth the price. Perstorp "delivered in line with its business plan and exceeded targets for growth and profitability," he argues.
All that activity is not bad for a company that could be forgiven for a sleepier, more geriatric pace. Perstorp-named for the small town in southwest Sweden it calls home-was formed in 1881 and was owned by its founding family for more than a century. Over the years, the company had become a miniconglomerate. Besides specialty chemicals, its interests included electronics, pharmaceuticals, and Pergo laminate flooring.
In 2001, Perstorp sold Pergo, the last of its nonchemical interests, and was acquired by the Swedish private equity firm Industri Kapital, which then embarked on a project to form a Nordic chemicals giant through consolidation of several smaller players. The first step came later that year when Industri Kapital merged Perstorp with Neste Oxo, originally part of the chemical business of Finland's Neste. Although the chemicals giant never rose, the project set in motion the portfolio sharpening that has helped Perstorp evolve into a focused specialties producer.
That evolution continued in December 2005 when the French private equity company PAI Partners acquired Perstorp. This January, in one more bit of noncore asset shedding, Perstorp sold its advanced composites unit YLA to the Dutch advanced materials producer TenCate. YLA produces thermoset composites, particularly for the aerospace market, from its base in Benicia, Calif.
Even with all those changes, however, most Swedes still think of Perstorp as plastics and laminates, concedes Susanne Jacobsson, the executive vice president of corporate human resources and communications. "They still don't think of the specialty chemicals. But Perstorp is everywhere, even though no one knows it."
For Jacobsson, the company's most important development has been spinning off "everything that didn't fit the specialty chemicals. We have moved back into the value chain to find niches where we can become number one, two, or three in world markets." PAI's agenda, she adds, "is to strengthen the strategy further, and to grow. Our ambition is to double our sales in the next five to six years."
The company also intends to focus on applications, she says, rather than products as such. Perstorp's chosen fields are coatings, urethanes, food and feed additives, formaldehyde technology, and catalysts.
ITS THREE R&D CENTERS—in Perstorp; Helsinki, Finland; and Vapi, India—are putting increasing emphasis on applications technology, Jacobsson says.
Earlier this month, for example, Perstorp reported what it calls a breakthrough in radiation-curing coatings technology. The company has figured out how to use its Oxymer polycarbonate diols to produce urethane acrylate oligomers for the ultraviolet/electron-beam-cured coatings industry. Because of their carbonate linkage, the diols impart "excellent UV and chemical resistance, hydrolytic stability, and outdoor weatherability" to radiation-cured coatings, explains Market Development Manager David James.
That kind of development is intended to help fuel what Jacobsson says is the company's target of 10% annual sales growth and 15% annual earnings growth.
Dankis, who joined Perstorp in October 2006 from a lock and security management company, says his nonchemical background gives him a fresh view on business aspects such as how to get closer to customers, develop effective pricing strategies, and capture value through growth.
He puts particular emphasis on continuing change within the company. For example, he says, "we want to be more international on the management team." Perstorp's executive vice president for sales is an American, and the company has just hired a Dutchman, Eric Appelman, to head R&D.
"Our mantra," Jacobsson adds, "is 'Everyone has something to learn, something to teach.' Especially when we merge newly acquired companies, the mantra is the foundation of the professional and personal integration of these companies."
Teaching, in its more fundamental sense, is also important for the company in relation to its workforce and community, she says.
She cites the case of Perstorp's chemistry high school, started a decade ago in its headquarters town. Students age 16 to 19 from all over southwest Sweden compete to attend the school and study chemical engineering and other sciences. One attraction is the summer internships that send students all over the world. Similarly, in Stenungsund, the company's large chemical complex on the Swedish coast, Perstorp works closely with technical universities and high schools.
Dankis supports this approach. People awareness, he says, "is part of the Perstorp way: We want the best people. A dynamic company can do this—can offer good opportunities to recruit people. And only growing companies are dynamic companies."
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