Bain Capital and Cinven have struck a deal to buy Lonza’s specialty chemical business for $4.7 billion. The deal will move 17 manufacturing sites and 2,800 employees over to the private equity firms and allow Lonza to focus on its health-care business, including a 10-year deal to manufacture Moderna’s messenger RNA vaccine against COVID-19.
In 2020, when CEO Pierre-Alain Ruffieux announced Lonza’s intention to get out of specialty chemicals, the unit posted $1.9 billion in sales, 31% of Lonza’s total for the year. “This provides the [specialty chemical] business with a significant opportunity to find a home where its value can be fully appreciated and its potential can be unlocked,” Ruffieux wrote in the Swiss firm’s 2020 annual report.
The divestment is part of Lonza’s transition into a pure-play health-care company providing active pharmaceutical ingredients and other contract manufacturing services to the drug industry. It reverses a diversification move the company made in 2011 when it acquired the antimicrobial chemical maker Arch Chemicals for $1.4 billion. That deal made Lonza the largest supplier of pool-disinfectant chemicals and brought several related business lines.
Lonza took a first step toward undoing the diversification in 2018, when it sold the pool-chemical operations to the private equity firm Platinum Equity for $630 million. The sale to Bain and Cinven includes other former Arch operations as well as long-time Lonza businesses such as biocides, ketene chemicals, and resins for composites.
Sibylle Bischofberger Frick, a financial analyst who covers Lonza at Bank Vontobel, is optimistic about what the sale means for the firm. “They kept the strong growth units and they will grow fast, mainly in biologics, cell and gene therapy, and bioscience,” she says. “The remaining business is a pure contract development and manufacturing organization with good margins and interesting growth potential.”
Bischofberger expects Lonza to invest the proceeds of the sale in new plants and equipment, acquisitions, efficiency improvements, and R&D.