Issue Date: January 31, 2011
Cytec Sells Basics Unit To Private Equity Firm
Cytec Industries has reached an agreement to sell its building block chemicals business to an affiliate of H.I.G. Capital for $180 million. The purchase is the third chemical acquisition in recent years for the Miami-based private equity firm.
The main asset of the building block chemicals business is a plant in Fortier, La., that manufactures melamine, acrylonitrile, and sulfuric acid. The business had sales last year of $600 million.
Cytec says it decided in the fourth quarter of last year to divest the business. CEO Shane Fleming says the sale will allow Cytec to "put more attention and resources on our core growth platforms of engineered materials, in-process separations, and waterborne and radcure [radiation cured] coating resins."
The sale will come at a cost to Cytec. Although the building block chemicals business mainly serves the merchant market, it does supply Cytec with melamine to make melamine resins and acrylonitrile to make carbon fiber. Cytec expects having to buy these chemicals at their current high prices will reduce its earnings this year by about 15 cents per share.
Laurence Alexander, a stock analyst at Jefferies & Co. noted in a report to clients that building block chemicals has historically been one of Cytec's most volatile businesses. Although sales last year were $600 million, they averaged $336 million over the past 10 years. And earnings before interest, taxes, depreciation, and amortization were about $59 million last year, compared to $37 million over the past 10 years, Alexander said.
For its part, H.I.G. is developing a small stable of chemical businesses. In 2008, it purchased two Illinois-based firms: a Croda oleochemicals business and the surfactants maker Petroferm. Last year, the oleochemical business, renamed Vantage Specialty Chemicals, invested in Lipo Chemicals, a supplier of ingredients to the personal care industry.
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