MOSCOW (MRC) -- WR Grace says it has entered into a definitive agreement to acquire Albemarle’s fine chemistry services (FCS) business for approximately USD570 million, including USD300 million paid in cash at closing and USD270 million funded through the issuance to Albemarle of non-participating preferred equity in a newly created Grace subsidiary, said Chemweek.
Grace expects to finance the cash portion of the transaction with a mix of cash and debt. The company will acquire Albemarle's contract-manufacturing facilities at Tyrone, Pennsylvania, and South Haven, Michigan, as part of the deal. The transaction is expected to close in the second quarter of 2021, subject to customary closing conditions, including receipt of certain regulatory approvals.
The terms of the agreement have been unanimously approved by Grace’s board, the company says. The transaction is structured to provide financial flexibility to Grace and it significantly strengthens and expands Grace’s existing pharma portfolio, the company says. The acquisition is expected to be accretive to Grace’s revenue growth rate, EBITDA margin, and adjusted earnings per share in 2021, Grace says. It adds approximately $60 million in full-year run-rate EBITDA in 2021, with EBITDA margins of more than 35%, it says.
Grace also expects modest near-term cost synergies with greater commercial and capital avoidance synergies over the longer term. The investment is aligned with Grace’s stated capital-allocation strategy and M&A criteria, the company says. Meanwhile, seller financing adds financial flexibility and capital efficiency, it says.
"This acquisition is strategically and financially compelling and aligns perfectly with our strategy of building a higher-growth portfolio by extending our existing capabilities into higher-growth, high-value end markets,” says Hudson La Force, president and CEO of Grace. “Combining these businesses strengthens our innovation and manufacturing capabilities and gives us scale that will further strengthen our customer value proposition and drive meaningful financial results for our shareholders.," La Force says.
Albemarle’s FCS business posted net sales of USD61.4 million and adjusted EBITDA of USD18.4 million in the fourth quarter of 2020. It is focused on contract manufacturing for the pharmaceutical, agricultural chemical, lubricants, and specialty chemical industries. The business's products include custom and generic active pharma ingredients (APIs) and registered starting materials (RSMs).
The divestment will leave Albemarle with three businesses: bromine specialties, catalysts, and lithium. "This transaction reflects our ongoing commitment to actively and continuously refine our portfolio as we focus Albemarle on its core, growth-oriented business segments. Fine chemistry services is a profitable business, and we have confidence that Grace is positioned to help it thrive," says Kent Masters, CEO of Albemarle.
Grace says that its board is working, meanwhile, with management and its financial advisors on a review of potential strategic alternatives to maximize value for shareholders. The process remains active and the company continues to pursue a number of potential opportunities, but there is no guarantee the review will result in any transaction or specific outcome, the company says. Grace does not intend to disclose developments unless or until the company determines that disclosure is appropriate or required, it says.
Goldman Sachs and Moelis & Co. are serving as Grace’s financial advisors and Fried, Frank, Harris, Shriver & Jacobson is serving as legal counsel to Grace on the transaction. Goldman Sachs, Moelis, and Wachtell, Lipton, Rosen & Katz are serving as advisors to Grace on the ongoing review of strategic alternatives.
BofA Securities is acting as exclusive financial advisor to Albemarle and Troutman Pepper Hamilton Sanders is acting as legal advisor to the company in connection with the transaction, Albemarle says.
As MRC informed previously, in April 2018, W. R. Grace & Co. completed the USD416 million acquisition of the Polyolefin Catalysts business of Albemarle Corporation.
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.