Solvay has inked an agreement to sell its cellulose acetate tow business to the private equity firm Blackstone in a deal worth $1.1 billion.
Acetate tow is a type of fiber made by treating wood pulp with acetic anhydride. It is primarily used in cigarette filters.
The Solvay business, called Solvay Acetow, generated nearly $600 million in revenues in 2015. It employs 1,300 workers and operates plants in Brazil, France, Germany, Russia, and the U.S.
The acetate tow sector is a perennial cash cow for Solvay, Eastman Chemical, Celanese, and other firms in the business. But declining cigarette sales in recent years, even in China, have caused production volumes and revenues to dwindle. Companies have been shutting down excess manufacturing capacity to adjust. In 2015, Solvay closed older acetate tow lines in Germany and Brazil.
Solvay CEO Jean-Pierre Clamadieu says the sale is “another significant step in Solvay’s transformation toward a multi-specialty chemical group with a higher growth profile.” Solvay says it will use the net proceeds to pay down debt. The firm expects the transaction will yield a $160 million capital gain.
Other moves in Solvay’s refocusing include its exit earlier this year from Inovyn, a European polyvinyl chloride joint venture with Ineos. The company is in the process of selling its South American PVC business, Indupa, to Brazil’s Carbocloro.
Meanwhile, Solvay bought composites specialist Cytec Industries a year ago. It purchased oil field chemical maker Chemlogics in 2013. In 2011, it acquired France’s Rhodia, the transaction that landed it the Acetow business.
Blackstone is interested in the money-producing potential of the business. “Acetow represents a great opportunity to invest in a highly cash-generative, market-leading global player,” says Lionel Assant, head of European private equity for Blackstone.
This won’t be the first time Blackstone has had its hands on an acetate tow business. The company purchased Celanese in 2004 and held a large stake in the firm until 2007. That deal was considered a monumental success for the private equity firm.