Phosphorus chemical maker Innophos to go private

In another deal that will take a small chemical company private, the phosphorus specialist Innophos has agreed to be acquired by the private equity firm One Rock Capital Partners in a transaction valued at $932 million.

Kim Ann Mink, the Cranbury, New Jersey–based company’s CEO, says Innophos’s relatively small size and market capitalization limit its ability to pursue a growth strategy.

“We remain confident that our transformational strategy is the right path forward for Innophos,” she says in a statement. “However, executing on this strategy in an increasingly volatile macroeconomic and complex financial environment as a small-cap public company remains challenging.”

The company had sales of about $800 million and operating income of $86 million in 2018.

In a conference call in August, Mink told analysts that Innophos was considering more acquisitions to strengthen its food, health, and nutrition division, which makes specialty phosphates and phosphoric acid for food and beverage applications. Innophos added to the division in 2017 by buying the nutraceutical maker NutraGenesis and the dietary supplement firm Novel Ingredients.

One Rock’s $32-per-share offer represents an 18% premium over Innophos’s average closing share price over the 30-day period before the deal’s announcement. Innophos is commencing a 30-day “go-shop” period, during which it will solicit better offers.

Innophos is the second public chemical company this year to ink an agreement to be taken private. In August, the small-molecule drug service firm Cambrex agreed to be acquired by the private equity firm Permira for $2.4 billion.

Chris Cerimele, managing partner of the investment banking firm Balmoral Advisors, says small and midsized public companies are allowing themselves to be purchased by both private equity firms and strategic buyers. Other recent examples include Cabot Microelectronics’ purchase of KMG Chemicals, Kuraray’s purchase of Calgon Carbon, and Synthomer’s acquisition of Omnova Solutions.

“Small and midsized publicly traded firms often feel like they are orphaned out there,” Cerimele says. “They don’t see a lot of benefit to being a public company.” Small public companies don’t get the investor attention the big firms do, yet they are saddled with the same expensive regulatory burden, he points out.