Cabot finds buyer for activated carbon unit

The elemental carbon specialist Cabot has agreed to sell its activated carbon business to One Equity Partners, a private equity firm, for $111 million, about a tenth of the $1.1 billion Cabot paid for the business in 2012.

Before becoming Cabot’s Purification Solutions division, the unit was a privately held company called Norit that was founded in 1918 in the Netherlands. The business’s main market has been scrubbing mercury from coal-fired power plant emissions. Though that seemed like a decent bet in 2012, in hindsight, coal was then starting a decade-long decline.

Though tightening emissions rules for power plants could have created more demand for scrubbing materials like activated carbon, cheap natural gas flooding the market about the same time made it easier for many users to ditch coal instead.

Coal didn’t even make the list of markets One Equity Partners mentioned in a statement about the acquisition. Instead, the firm highlighted renewable natural gas, food and beverage, chemicals, pharmaceuticals, air, water, and automobile uses as growth areas for activated carbon.

Norit had been profitable on and off in the years leading up to its acquisition, but as a part of Cabot, the business bounced between profits in the low-single-digit millions and losses as high as $19 million. In 2020, it made $3 million on $257 million in sales. Cabot had reduced its estimate of the value of the business a number of times over the years, and lost around $190 million offloading a connected US mine and plant in 2020. The firm had been looking for a buyer for a number of years.

After the sale, Cabot will primarily make carbon black for a range of markets including tires, batteries, plastics, and construction materials. It sold a smaller specialty cerium fluids division for $135 million in 2019. In November of this year, Cabot announced the acquisition of a carbon black plant in China from Tokai Carbon for $9 million. In response to the activated carbon sale, Deutsche Bank increased its earnings expectation for Cabot over the next 3 years by 7–12%.