MOSCOW (MRC) -- Lonza says it has reached an agreement with a consortium of private equity firms Bain Capital and Cinven for the previously announced sale of the Lonza Specialty Ingredients (LSI) business and operations, for an enterprise value of 4.2 billion Swiss francs (USD4.7 billion), said Chemweek.
The transaction is expected to close in the second half of 2021, subject to customary closing conditions, Lonza says.
Lonza's plans to carve out LSI were first announced in June 2019. The company started to look for potential buyers in July last year and since October 2020 reports emerged of a potential sale of LSI to Bain and Cinven, or other financial and industry firms.
Bain and Cinven say they intend to collaborate closely with Lonza going forward, as well as with employee representative bodies in Switzerland and across the group. “Bain Capital and Cinven have shown they understand the value of the experience and expertise of our specialty ingredients employees. They presented the most compelling industrial strategy and vision for the business, they are also keen to prioritize R&D and innovation, as well as to invest in existing facilities to unlock the potential of the business," says Albert Baehny, chairman of Lonza.
LSI is one of two segments within Lonza. The other is pharma, biotech, and nutrition. The LSI business is a provider of microbial control solutions for professional hygiene and personal care products that operates across 17 manufacturing sites worldwide and has approximately 2,800 permanent employees. LSI was reported as discontinued operations in Lonza’s 2020 results. The segment’s sales declined 2.1% to SFr1.68 billion in 2020.
Baehny says that selling the LSI business “will allow Lonza to focus on its position as a leading partner to the healthcare industry, and the free cash flows resulting from the sale will allow us to accelerate our strategic priorities."
According to David Danon, managing director at Bain, “LSI has multiple attractive growth opportunities as the leading global player in the growing market for microbial control. Our strategy is to reinforce the company’s market position, to accelerate growth through further investment in R&D and innovation, and to use LSI as a platform for further industry consolidation, in line with Bain Capital’s and Cinven’s strategies in other sectors."
Bain owns chemical companies Diversey (Fort Mill, South Carolina) and Italmatch (Genoa, Italy), and in the past it owned Brenntag and Trinseo. Cinven has a majority stake in chemical distributor Barentz International (Hoofddorp, Netherlands), owns the construction chemicals firm Chryso (Daventry, UK), and in the past bought and sold the advanced ceramic business CeramTec (Plochingen, Germany) and the plastic packaging manufacturer Kloeckner Pentaplast (Luxembourg).
Bain says that advisors to the consortium include Kirkland & Ellis, Freshfields, Lenz & Staehelin, Ernst & Young, Boston Consulting Group, Alvarez & Marsal, ERM, Nexant, The Valence Group, Opus Corporate Finance, and Trumont International (London, UK).
As per MRC, Lonza said it is making a “significant” investment to expand particle-engineering and drug-product capabilities at its Bend, Oregon, site with a total of 11 new suites, to meet increased market demand.
We remind that in 2012, Lonza set up a task force to look at new supply routes and vendors to feed its cracker in Visp, Switzerland, following the shutdown of Petroplus’ refinery at Cressier in January, 2012. Lonza’s cracker has an ethylene capacity of 25,000 tonnes/year.
Ethylene and propylene are feedstocks for producing PE and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, exluding producers' inventories as of 1 January, 2020).